The next target for the Nifty is placed at 11,089 which happens to be 61.8 percent retracement level. Oscillators and indicators have also been showing strength on the daily charts
Vinay Rajani
The Nifty has been in an up move for the last six sessions, gaining more than 350 points. It recently surpassed the crucial resistance of its 200-DMA.
The Nifty's previous top was placed at 10,775 on the daily chart, which has also been taken out on a closing basis. The index is now trading above its 20, 50, 100 and 200-day EMA which indicates strength in the intermediate trend.
Higher top and higher bottom formation is well intact on the Nifty daily chart. At 10,882, Nifty has completed the 50 percent Fibonacci retracement of the entire fall seen from 11,760 (all-time high made in August 2018) to 10,004 (bottom of Oct 2018).
Now, the next target for the Nifty is placed at 11,089 which happens to be 61.8 percent retracement level. Oscillators and Indicators have also been showing strength on the daily chart.
RSI has been moving up and has now reached at 62, which is still at a fair distance from the overbought zone. The MACD has also reached above its signal line and equilibrium line.
Support for the Nifty is now shifted upward to the 10,700-10,775 range. It would be advisable to remain long in Nifty for the upside target of 11,089, keeping a stop loss at 10,700 on a closing basis.
As far as Bank Nifty is concerned, it has retraced more than 61.8 percent of the entire fall seen from 28,388 (August 2018 high) to 24,240 (October 2018 low). This development negates the chances of resuming downtrend, which initially started in August 2018.
The next resistance for the index is placed at 27,150 and 27,410 whereas support levels have also shifted upwards towards 26,380 in the spot market.
The Nifty Midcap index has reached the highest level since September 26. We expect market breadth to improve further. Going forward, we see an opportunity in the auto sector where momentum buying could emerge.
Two-wheeler companies are expected to outperform in the coming days. To conclude, the trend of the market is bullish and staying with the trend would be a better strategy. Do not try to anticipate the top. Investors should trade with trailing the stop losses at regular intervals.
Here is a list of 3 stocks that could return 7-8 percent in the next one month:
SBI: Buy| LTP: Rs 287| Target: Rs 308 | Stop loss: Rs 273| Return: 7 percent
The stock price of SBI has been consolidating for the last one month. The primary trend of the stock is bullish with higher tops and higher bottoms.
The short-term moving averages have been holding above the long-term moving averages. PSU Banking stocks have been witnessing a long build-up in the derivative segment.
Considering the technical evidence discussed above, we recommend buying the stock at the current market price for the target of Rs 308 and keeping a stop loss placed at Rs 273 on a closing basis.
Hero MotoCorp Ltd: Buy| LTP: Rs 3,040| Target: Rs 3,250| Stop loss: Rs 2,910| Return: 7 percent
The stock has fallen 26 percent from its all-time high of Rs 4,092 recorded in September of 2017. The stock price has nicely recovered from its recent low of Rs 2,648 and has given a bullish breakout from the inverse Head and Shoulder on the daily chart.
The stock is maintaining higher tops and higher bottoms formations on the daily chart. Moving average and oscillator setup seems bullish on the charts.
Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 3,250 and keeping a stop loss placed at Rs 2,910 on a closing basis.
Kotak Mahindra Bank: Buy| LTP: Rs 1,226| Target: Rs 1,325| Stop loss: Rs 1,160 |Return: 8 percent
The stock price has recently surpassed the crucial resistance level of 50, 100 and 200-DMA. The stock has been making higher tops and higher bottom formation on the weekly charts.
The primary trend of the stock is bullish. Oscillators and indicators have been holding strong. The private banking space has been performing well and Bank Nifty also holds its uptrend.
Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 1,325 and keeping a stop loss at Rs 1,160 on a closing basis.
(The author is Technical Analyst, HDFC securities.)
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