Technical setup suggests the current scenario is more favourable for contra trend traders rather than trend followers as we are stuck in a range.
Manali Bhatia
Rudra Shares and Stock Brokers
Amid heavy volatility in global peers, India is all set to end the year as best performing Asian market. As expected Nifty has shown smart recovery from support levels last week and closed with the weekly gain of almost 1 percent at 10,859.
Nifty has taken support at 50-Day Moving Average last week and formed a bullish candlestick pattern called 'piercing line' and long shadow touching 10,550 making it an important support level in days to come. Technical setup suggests the current scenario is more favourable for contra trend traders rather than trend followers as we are stuck in a range.
For the coming week, 11,040, which is 38.2 percent retracement projection of previous week range, will act as a major resistance level. A decisive breakout could further encourage the bulls till 11,218 and 11,316. On the other hand, support for the week exists at 10,715 and 10,540.
Option band signifies the trading range of 10,500 to 11,000. As 10,500 put option holds more than 32 lakh open contracts and combining it with technicals, 10,500-10,540 range is emerging as an important support zone in short term. We recommend fresh buying in Nifty at dips only or above 11,040.
Here are four technical picks which could return 8 to 11 percent in short term:
Zee Entertainment: Buy | CMP: Rs 474.45 | Target: Rs 526 | Stop loss: Rs 430 | Return: 11 percent
The stock has been in a continuous uptrend since 2013 and recent fall has arrested at 38.2 percent retracement level. Monthly RSI is bouncing back from an important support level of 40. A long bullish candle has emerged on the monthly chart after testing 50-day exponential moving average.
On the weekly chart, prices have broken the declining trendline resistance and RSI is making a range shift towards the bullish zone. On the daily chart, the stock has taken support at rising trendline and RSI has bounced back from support levels. Hence, this can be bought for short-term gain.
Colgate Palmolive: Buy | CMP: Rs 1,320.15 | Target: Rs 1,438 | Stop loss: Rs 1,255 | Return: 9 percent
After giving a fresh breakout, the stock has retraced mildly. RSI has taken support at important levels suggesting fresh upside momentum is likely in coming days.
Momentum indicators in monthly, weekly and daily time frame are in a bullish zone and trading above important moving averages. Thus, the stock can be bought at the current level and on any dip till Rs 1,270 and can be held for short-term gain.
L&T Finance Holdings: Buy | CMP: Rs 154.45 | Target: Rs 170 | Stop loss: Rs 145 | Return: 10 percent
The stock has been through a decent correction in the current year and the fall stopped at 61.8 percent retracement level. Also, a bullish Doji at 50-Day Exponential Moving Average followed by a long green candle confirmed the support.
The stock has also started trading above 20-week Moving Average. On the daily chart, the stock is going through the bullish crossover of major moving averages and RSI is also trading in bullish zone. Thus, can be bought for short-term gain.
Bajaj Finserv: Buy | CMP: Rs 6,502.90 | Target: Rs 7,022 | Stop loss: Rs 6,170 | Return: 8 percent
The stock is trading with higher top and higher bottom on the monthly chart and the recent fall stopped at 20-month moving average with bullish engulfing candlestick pattern. RSI has taken support at 60 and prices formed bullish candle suggesting the upmove is likely to continue.
On the daily chart, the stock has seen a bullish crossover of important moving averages and momentum indicators are trading in bullish zone hence can be bought at the current level and on any decline till Rs 6,300 for a short-term gain.
The author is Senior Research Analyst at Rudra Shares & Stock Brokers Ltd.
Disclosure: Rudra or its research analysts, or his/her relative or associate do not have any direct or indirect financial interest (except L&T Finance Holdings Ltd.) nor any other material conflict of interest at the time of stock recommendation, in the subject company. Also, Rudra or its research analysts, or his/her relative or associates does not have actual/beneficial ownership of one percent or more securities of the subject company.
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