Podcast | Stock Picks of the Day: 'Use dips towards 10,600-10,750 on Nifty to buy for long'

Dharmesh Shah

The Nifty on the weekly chart formed a bullish hammer like a candle with a long lower shadow indicating strong buying demand emerging from 61.8% retracement of December-February rally (10,334 – 11,118) at 10,633.

The sharp rise in volatility during the current week saw the index oscillating in the 200-points broad range of 10,700-10,900. The Nifty failed to sustain above the upper band of consolidation (10,900) owing to escalating geopolitical concern, in turn helping stochastic oscillator to cool-off (currently placed at 75).

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After all the negative news, the index managed to form a higher high-low, suggesting market resilience. Going ahead, we expect the index to move out of the ongoing consolidation (10,900-10,600), eventually paving the way for the next leg of the up move.

Meanwhile, the market would remain volatile in the coming week on account of geopolitical concerns and any corrective decline during the current volatility towards the support area of 10,750–10,600 should be capitalised as an incremental buying opportunity for the next leg of the up move.

Here is a list of top two stocks which could give 9-11% return in the next 1-6 months:

Tata Steel: Buy| LTP: Rs 507| Target: Rs 560| Stop Loss: Rs 468| Upside 11%| Time Frame 6 months

The share price of Tata Steel has undergone secondary corrective phase over the past year. We believe that this corrective decline is getting anchored around earlier multi-year consolidation breakout area around Rs 470 level thereby offering fresh entry opportunity with favorable risk reward set up for the next up move in the stock.

We expect, stocks to uphold the key support zone of |470 as it is a confluence of:
a) 50% retracement of 2016 – 18 rally (190 – 756) at 473
b) 200 weeks SMA placed at 445

c) Earlier breakout area of 2014-17 consolidation around 472

Among the oscillators the weekly MACD logged a bullish crossover, signifying acceleration of positive momentum thus supports the positive bias in the stock.

In nutshell, the base formation at key support threshold (470) augurs well for the stock to resolve higher towards 560 as it is 38.2% retracement of entire CY-18 corrective move (756 – 441), at 561.

Berger Paints: Buy| LTP: Rs 299| Target: Rs 327| Stop Loss: Rs 284| Upside 9% Time Frame 1 months

The share price of Berger Paints has been in secular uptrend forming higher high and higher low in the long-term charts. The recent decline from levels of Rs 345 to Rs 285 is seen as a secondary phase of corrections and are an integral part of the primary uptrend that helps to cool off the excess on the price.

The stock has been forming a base at the major support area of Rs 285-295 being the confluence of the following technical observation:

a) The lower band of the rising channel containing the entire up move since November 2016
b) The 52 weeks EMA placed at 298 levels

c) 61.8% retracement of the entire previous up move (260-345)

The stock has already taken 10 weeks to retrace just 61.8% of the previous eight weeks up move from Rs 260 to Rs 345. A slower retracement of the previous up move signals a robust price structure

The recent base formation is approaching maturity. We expect the stock to resume up move with a favourable risk-reward set up and head towards Rs 330 levels as it is the 80% retracement of the previous decline (345-285).

(The author is Head Technical, ICICIdirect.com Research)

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. First Published on Mar 1, 2019 08:29 am