Podcast | These 3 stocks may offer 17-19% returns in 6 months

Dharmesh Shah

The Nifty on the weekly chart formed a ‘Hammer’ candlestick pattern with a long lower shadow indicating buying demand emerging near the 50 percent retracement (around 10,440 levels) of the last leg of the upmove (9,952–10,929).

The index witnessed a sharp rebound from the support level and is currently consolidating near 10,600 levels. We expect the index to maintain a positive bias, amid high volatility, and extend the upmove towards 10,850 levels, which is the confluence of the 80% retracement (10,827) of the last leg of decline (10,929-10,418) and placement of the falling trend line (around 10,850 levels) drawn adjoining the January-May high.

Over the past two weeks, the index underwent a secondary phase of healthy consolidation as it cooled off from the overbought situation that developed after the 10 percent rally (9,952-10,929) seen over the last two months.

Going forward, we expect the Nifty to form a higher base by consolidating in a broader range of 10,400–10,850 that would pave the way for the next leg of the upmove.

Thus, any breather from here on should be capitalised to accumulate quality stocks in a staggered manner. The improving price structure makes us comfortable to shift the support base upward to 10,400, being the:

b) Last week’s low placed at 10,418

Structurally, the Nifty Midcap and Smallcap have held on to their March lows and formed a potential double-bottom by forming a hammer candlestick pattern on the weekly chart. The placement of the hammer candle at the bottom indicates a bullish reversal. This structural improvement augurs well for the broader market. We expect the broader markets to outperform in the coming session.

Here is a list of top three stocks that could deliver 17-19% return in the next six months:

Pfizer: Buy| Target: Rs 2,960| Stop Loss: Rs 2,240| Return 19%| Time Frame 6 months

The share price of Pfizer India is in a strong uptrend forming rising peak and rising trough and has recently registered a Flag breakout in the monthly chart highlighting the strength in the uptrend which offers a fresh entry opportunity from a medium-term perspective.

The stock entered a sideways consolidation mode after hitting a 52-week high of Rs 2,369 in mid-February 2018 and, thereafter, oscillated in a price band of Rs 2,350 to Rs 2,050 in the last three months.

Pictorially, this sideways consolidation has taken the shape of a bullish Flag pattern as highlighted in the adjoining chart.

The resolute breakout from the bullish Flag pattern in current months trade signals conclusion of the secondary corrective phase and resumption of the primary uptrend thus provides fresh entry opportunity.

The stock has major support in the range of Rs 2,150-2,200 being the confluence of 80% retracement of the previous up move from Rs 2,050 to Rs 2,549 and 12-months EMA.

Time-wise, the stock has seen a faster retracement of the last falling segment as nine weeks decline from Rs 2,369 to Rs 2,080 was completely retraced in just four weeks signalling a robust price structure.

Based on the above technical observation the stock is likely to continue with positive bias and head towards Rs 2,978 levels being the measuring implication of the flag breakout.

The height of the pole of the flag 688 points (2369-1681=688) added to the breakout area of Rs 2,300 projects upside towards Rs 2,978 (2300+ 688=2978).

AIA Engineering: Buy| Target: Rs 1,850| Stop Loss: Rs 1,440| Return 17%| Time Frame 6 months

The share price of AIA Engineering is in a strong uptrend forming a rising peak and rising trough and has recently registered a breakout above the three months consolidation (Rs 1,350-1,494). Thus, it offers a fresh entry opportunity from a medium-term perspective.

The base of the last three months consolidation is placed at the major support area around Rs 1,340-1,390 as it is the confluence of the following technical parameters:

c) 80% retracement of the previous major up move (| 1273-1709) is placed around | 1360 levels

Time-wise, the stock has already taken 22 weeks to retrace just 80% of the previous 15 weeks up move from Rs 1,273 to Rs 1,709.

The slower pace of retracement of the rally is a cornerstone of a bullish price structure and indicates the corrective nature of price decline.

Among the oscillators, the weekly MACD has generated a bullish crossover above its signal line thus supports the positive bias in the stock.

Based on the above technical parameter we expect the stock to continue with its current uptrend and head towards Rs 1,850 as it is the 138.2% external retracement of the entire previous decline (| 1709-1320).

Taj GVK Hotels & Resorts: Buy| Target: Rs 265| Stop Loss: Rs 205| Return 17%| Time Frame 1 month

The stock has registered a resolute breakout above the bullish flag pattern highlighting the strength in the uptrend and offers a fresh entry opportunity from a medium-term perspective.

The base of the flag pattern is placed at the crucial support area of Rs 205-210 as it is the confluence of the 50% retracement of the previous up move (Rs 152 to 263) and the trendline support joining previous high placed around Rs 210 levels signalling robust price structure.

Time-wise, the stock has already taken 24 sessions to retrace just 50% of the previous 20 sessions up move from Rs 152 to 263. A shallow price wise correction indicates robust price structure that augurs well for next leg of up move.

Among the oscillator, the weekly 14 period’s RSI remains in an uptrend and is seen taking support at its nine period’s average thus validates the positive bias in the stock.

We expect the stock to maintain positive bias and head towards Rs 268 being the 161.8% extension of the previous up move (208-243) as projected from the recent trough of Rs 210. This signals an upside towards Rs 268 in the short-term.