Trend reversal seen only if Nifty breaks 9,200; bet on these 3 stocks for 15-20% returns

Shabbir Kayyumi

After giving a breakout from the consolidation zone, Nifty extended its gain and managed to close above 9,800 mark last week.

The index gave range breakout and moved almost 500 points in two days with a gap-up move. Weekly Heikin Ashi candlestick pattern is flat bottom with a big body candle.

Nifty has given a breakout of Cup and Handle classical technical pattern which is having a neckline around 9,200-9,300 levels and the target as per pattern is 10,500 mark. Also, recently formed ABCD harmonic pattern's D leg can extend towards 161.8 percent of AB projecting bullish price action towards 10,250 levels. So under normal circumstances, the target for the recent rally is 10,250-10,500.

Shabbir Kayyumi

Head of Technical & Derivative Research|Narnolia Financial Advisors

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In the very near term, after the recent sharp rally, some consolidation or small retracement as mean reversion is highly probable. On the downside, all-important support is at 9,200. Only a decisive close below the crucial support of 9,200 will be an early sign of trend reversal.

Banking Index rallied in the last week, however, it is halting near its previous swing high placed around 21,900 mark. Bank Nifty needs to trade decisively above 22,000 psychological levels for further upmove and would be prone to some retracements in the very short term.

Here are the three stocks which could give 15-20 percent return in short term:

ITC: Buy Around Rs 175 | Target: Rs 210 | Stop Loss: Rs 159 | Upside: 20 percent

The stock witnessed sustained sell off over the past few days, however, the strong demand zone around Rs 145-150 levels which has emerged as the support for the same.

On the weekly chart, line of polarity suggests a strong base and until this break decisively. The formation of Cup and Handle pattern on weekly chart indicates the consistency of positive rhythm in the stock.

We expect the stock can perform going ahead and recommend buying in stock around Rs 175 with stop loss of Rs 159 for the target of Rs 210.

Mahindra & Mahindra: Buy Around Rs 365 | Target: Rs 430 | Stop Loss: Rs 330 | Upside: 17 percent

Daily chart of stock reveals that demand is increasing and supply is diminishing as stock is taking support from line of parity showing rebound from its lower levels.

Price has been trading above the consolidation phase after giving breakout for last few days and also forming Cup and Handle price pattern indicating strength from bottom.

With the chart looking attractive and decent volume participation witnessed, we recommend a buy around Rs 365 in this stock for an upside target of Rs 430, keep a stop loss of Rs 330.

Tata Steel: Buy Around Rs 295 | Target: Rs 340 | Stop Loss: Rs 270 | Upside: 15 percent

Stock has formed a double bottom price pattern on the daily chart, which should resolve on the upside after its brief consolidation.

The momentum oscillator RSI is in positive territory and entering into a trending phase. The MACD too indicates good momentum-trend follow-through.

We recommend a buy Tata Steel around Rs 295 with a stop loss of Rs 270 and a target price of Rs 340.

(The author is Head of Technical Research at Narnolia Financial Advisors.)