The market strength is always judged on corrections. The Tuesday decline failed to conjure any follow-up move on the downside. In fact, the starting point of current four-digit gann channel (i.e. 9801) proved the savior, and in Thursday’s trade, marked an intra-day high of 9,923.
Despite Nifty’s whipsaw moves in this week’s trade, BankNifty is gradually moving higher. In fact, Nifty Private Bank index is leading from the front. Currently, the last leg of ABCD extension projects an upside potential of up to 13,540 – 13,670.
In Thursday’s session, Nifty lost early morning gains to enter negative territory. Forming a ‘dark cloud cover’ candle pattern (it opened higher but settled near mid-point of the previous candle), Nifty closed at 9873; down by 26 points.
A negative confirmation to ‘dark cloud cover’ candle could trigger consolidation action to digest the recent sharp up moves. Focusing on up trending stocks is clearly the ideal approach.
The Nifty Midcap 100 index is trading below the May 2017 peak. A Nifty Midcap 100 move above 18,490 would alone confirm an upside shift in the orbit.
Here is a list of top five stocks which could give up to 7% return in the short term:
Bharat Forge: SELL| Target Rs1070| Stop Loss Rs1155| Return 5.6%
On the daily chart, Bharat Forge has retreated from resistance line with the formation of a ‘shooting star’, which is considered as trend reversal pattern.
The inability of stock to conquer ground above its 35-DMA and also its three-digit gann number of 116(0) has reinforced the negative trend in the counter and stock is expected to struggle in the near term.
Bharat Forge had a strong rally from the low of Rs1,053 in June-end to a recent peak of Rs1,162, but it failed to retrace 61.8% of the entire move from the high of Rs1,221 to a recent low of Rs1,053, which corroborates that major up-move is exhausted.
To optimize risk reward scenario July shorts position should be entered below Rs1,130 with stop loss of Rs1,155 for a downside target of Rs1,070.
Axis Bank: BUY| Target Rs580| Stop Loss Rs520| Return 7.4%
The classic pattern of a higher top and higher bottom price set-up on long term charts has ensured that the stock has been trading in a secular uptrend.
Since its all-time high level of Rs655 (made during March’15), the stock has entered into a long term congestion phase.
Recent price structure shows a steady move above its 50 week EMA and a positive breakout from multi month consolidation phase. Given the close above Rs530 on comparatively higher volumes, the stock has resumed its prevailing uptrend.
Based on above parameters, we recommend a buy on Axis Bank above Rs540 with a stop loss of Rs520 and a target of Rs580.
HDFC Bank: BUY| Target Rs1800| Stop Loss Rs1670| Return 5%
A steady move above most of the important moving averages and ascending series of peak and bottom indicates healthy long term price set up.
During recent correction, bulls outstrip bears near levels of Rs1,650 and since then it is moving higher; thereby resuming the prevailing uptrend.
A record high closing above Rs1,700 on a rising volume activity suggests an ongoing journey into an uncharted zone is likely to continue. Based on above observations, we recommend a buy on HDFC Bank above Rs1,710 with a stop loss of Rs1,670 and a target of Rs1,800.
NMDC: BUY| Target Rs133| Stop Loss Rs118| Return 7%
Post a prolonged downtrend, the stock has formed an important bottom near Rs103 during June’17. It recovered sharply thereafter towards Rs120 zone and witnessed a decisive close above its 50 days EMA, historically these EMA levels were acted as hurdle point on several occasions.
On Thursday, it formed bullish candle and managed to witness a positive break out of its recent consolidation phase suggesting rally could continue till Rs133.
Based on above observations, we recommend a buy on NMDC above Rs123 with a stop loss of Rs118 and a target of Rs133.
DHFL: BUY| Target Rs510| Stop Loss Rs464| Return 6%
After being in a phase of consolidation at the top of its rally for last month, it finally staged a breakout on the upside. It is showing the trait of a stock which is in a strong uptrend since December 2016.
Since last one month, the sideways consolidation at the top of its trend can be termed as bullish consolidation. The outcome of such sideways movement are dealt positively during an uptrend.
Moreover, during the recent phase of consolidation, it managed to trade above the support of its 35-DMA. Fresh breakout was seen in Thursday’s trade from the recent sideways activity. We expect the stock to witness follow-up buying post 2 percent move.
Based on above parameters, we recommend a buy on DLF above Rs478 with a stop loss of Rs464 and a target of Rs510.
Disclaimer: The author is Head of Technical Research at IIFL Private Wealth. The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.[“Source-moneycontrol”]