Short covering likely above 10,175 on Nifty; 3 stocks which can give up to 12% return

Aditya Agarwala

The Nifty50 index started the week on a positive note and after undergoing relentless selling in the previous four weeks. Further, it bounced back after nearly testing the crucial support level placed at the 38.2 percent Fibonacci retracement level placed at 9,920.

However; it continues to trade below the 200-DMA i.e. 10,175 and a failure to cross this resistance will keep markets in the bear grip.

Further, a sustained trade above 10,175 can trigger more short covering taking it to levels of 10,300. A breakout and close beyond 10,300 can extend the up move to levels of 10,450.

Aditya Agarwala

Technical Analyst|YES Securities (I) Ltd

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Moreover, failure to cross 10,175 can resume the corrections dragging it lower to levels of 9,920-9,690. Technical oscillator RSI has formed a positive divergence suggesting extended short covering rallies in the coming trading sessions before Index resumes its downward trajectory.

Here is a list of top three stocks which could give up to 12% return in the next 3-4 weeks:

Varun Beverages Ltd: BUY| Target Rs695| Stop Loss Rs590| Return 11%

On the weekly chart, Varun Beverages Ltd. (VBL) is on the verge of a breakout from a falling wedge pattern after taking support at the 61.8% Fibonacci retracement level placed at 597 (as indicated on chart).

A sustained trade above 655 can trigger a breakout from the wedge resuming the uptrend. On the daily chart, the stock has broken out from a sideways consolidation range confirming the bull trend reversal.

Moreover, RSI formed a positive divergence with price affirming bullishness building up in the stock. The stock may be bought in the range of 626-630 for targets of 675-695, keeping a stop loss below 590.

JK Lakshmi Cement Ltd: BUY| Target Rs515| Stop Loss Rs425| Return 12%

On the weekly chart, JK Lakshmi Cement Ltd. (JKLAKSHMI) is on the verge of a breakout from an Ascending triangle pattern neckline placed at 463. Breakout with healthy volumes can trigger a bull trend reversal.

Moreover, on the daily chart, it has broken out from a trend line resistance suggesting further upside in the stock.

The RSI has turned upwards breaking out of the upper Bollinger Bands suggesting extended bullishness in the coming trading sessions. The stock may be bought in the range of 456-460 for targets of 500-515, keeping a stop loss below 425.

ICICI Prudential Life Insurance Company Ltd: BUY| Target Rs419| Stop Loss Rs365| Return 9%

On the weekly chart, ICICI Prudential Life Insurance Co. Ltd. (ICICIPRULI) is taking support at the previous trough placed at 370 and turned higher. A sustained trade above 390 can resume the uptrend taking it higher.

On the daily chart, the stock is on the verge of a breakout from a falling wedge placed at 391 after forming a consolidation base around 370 levels. The stock may be bought in the range of 380-384 for targets of 410-419, keeping a stop loss below 365.