Podcast | See Nifty at 10,950 levels; 3 short-term buys that could offer up to 10%

Nandish Shah

The Nifty closed Monday flat but above the crucial 10,800 mark for the second day in a row. From the bottom of 9,951 registered on March 23, the Nifty has risen 855 points, or 8.6 percent, to close at 10,806. The index has been holding above all important moving average parameters ahead of the event, indicating a bullish trend on all timeframes.

Oscillators have been moving strongly on the short- to medium-term charts. The average directional index (ADX) indicator has provided a fresh momentum buy signal on the Nifty daily charts by crossing the DI line on the upside, which indicates a strong upmove in coming sessions.

The BankNifty has managed to outperform in this recovery by rising 12 percent from the bottom to close at 26,475 levels. The inverse head and shoulder pattern breakout was confirmed on BankNifty daily charts on April 27. The target of this pattern comes around 27,500 levels, which is more than 1,000 points away from its current levels.

The Nifty Midcap and Smallcap indices have been significantly underperforming the benchmark indices. Due to that, overall market breadth have been weak for the last two weeks.

In the derivatives space, we have seen long positions being built in the Nifty and Bank Nifty futures last week. Moreover, foreign institutional investors (FIIs) also created long positions in the index and stock futures last week.

The put-call ratio also rose sharply to 1.65 level from 1.49 levels on the back of aggressive Put writing at 10,600-10,700 levels, suggesting that the Nifty would find strong support around 10,600 levels.

On the higher side, the Nifty may find resistance around 11,000 levels at which calls have been written. Considering the evidence discussed above, we advise accumulating long positions in the Nifty with a stop-loss of 10,600 and a target of 10,950.

Here is a list of top three stocks that could deliver up to 10% return in the short-term:

Exide Industries: Buy| Target: Rs 275 | Stop-loss: Rs 250 | Return 6%

After giving a breakout on the weekly charts in the week gone by, the stock closed at an all-time high. The stock price is witnessing some sideways movement since the last few days.

Exide is trading above its 20, 50, 100 and 200-SMA, which indicates bullish setup for the medium to long-term charts.

The momentum indicators like MACD is also showing strength in the stock. Therefore, we believe that this sideways movement is a good buying opportunity for the short to medium-term.

Therefore, we recommend buying Exide Industries at the current market price of Rs 259 for the upside target of Rs 275, and a stop loss below Rs 250.

Edelweiss Financial Services: Buy| Target: Rs 325 | Stop-loss: Rs 285 | Return 8%

Edelweiss Financial Services has given a bullish trend line breakout on the daily chart with higher volumes by closing above the downward sloping trendline, adjoining the highs of 03-November-2017 and 03-May-2018.

It has also given a breakout on the daily line chart by closing above multiple resistance levels of Rs 297. The short-term moving averages are trading above long-term moving averages which indicates the bullish trend for the short term.

The momentum indicators and Oscillators like RSI and MACD are showing strength in the stock for the short to medium term. Therefore, we recommend buying Edelweiss Financial for the upside target of 325 and keep a stop below Rs 285.

Mahindra Lifespace Developers: Buy| Target: Rs 568 | Stop-loss: Rs 485 | Return 10%

The stock price has given a breakout on the daily chart last Friday, where it closed above the crucial resistance level of Rs 485.

On Friday, the stock price also closed above its 5-day SMA which was placed at Rs 477 levels. The trend of the last few days suggests that whenever price starts rising with higher volumes indicates strength in the uptrend.

The momentum indicators and Oscillators like RSI and MACD are showing strength in the stock for the short to medium term. Therefore, we recommend buying Mahindra LifeSpace for the upside target of Rs 568, and a stop below Rs 485.