The Nifty is seen consolidating in a narrow range over the last three sessions while digesting strong gains amassed in the previous week. The current consolidation has occurred above the breakout area of 9,550 that had acted as a crucial hurdle in the previous week.
Structurally, the index has posted a faster retracement of its last falling segment as the five-session decline (9,532 to 9,341) was completely overhauled in just two trading sessions.
We believe faster retracement of the last falling segment highlights robust price structure and opens further positive options for extension of current up move towards 9,750 regions in the short-term.
The upper band of rising channel encompassing the up move since February 2017 and price wise equality with last rising segment (9088 to 9532 =444 points) projected from recent higher bottom of 9341 provides upsides towards the 9785 region
The sharp recovery last week has pushed the short-term stochastic oscillator into the overbought territory with a reading of 92, which may lead to some consolidation in the coming sessions.
Further, the ongoing profit booking trend across recently run up sectors/stocks will lead to stock specific action in coming sessions.
The immediate support base for the index is placed at 9,350 region as it is the confluence of lower band of rising channel and higher bottom formed in last week trade.
Here is a list of top 4 stocks which can give up to 21% upside in next 6 months:
Mahindra CIE: BUY| Target Rs290| Stop Loss Rs212| Upside 20%| Time Frame 6 months
The stock had registered a strong volume-led a breakout from 12-month consolidation above Rs222 in April 2017. After the strong breakout rally from Rs180 to Rs257 in just four months, the stock entered a sideways consolidation mode and oscillated between the broad range of Rs257 and Rs225 in the last six weeks.
The entire consolidation over the last six weeks occurred above the breakout level of Rs222 highlighting the change of polarity principle as per which a significant resistance once taken out reverses its role and acts as a support for future price movement.
We believe the six weeks consolidation above the previous breakout area has laid the platform for the next up move. The volume behaviour also supports the positive bias in the stock as the breakout from the major consolidation range was accompanied by a strong volume of more than double of the 50 weeks average volume highlighting larger participation.
Dabur India: BUY| Target Rs320| Stop Loss Rs265| Upside 14%| Time Frame 3 months
The NSE FMCG index has recently registered a resolute breakout above the long-term bullish Cup & Handle pattern. It is a sign that the FMCG space is likely to outperform the benchmark indices going forward.
The share price of Dabur India is attractively poised at its key value area and presents a good buying opportunity with a favourable risk/reward for medium term perspective.
The price wise correction from June 2016 all-time high of Rs320 got arrested precisely near the major value area for the stock placed around Rs260 region, as it is the confluence of a long term rising trend line drawn off October 2014 bottom and 61.8% Fibonacci retracement of 2016 up move placed around Rs265 region.
We believe the corrective phase in the stock has approached maturity and it is attractively poised above its major value area. We expect the stock to challenge its key overhead trendline joining the highs of August 2015 and July 2016 placed around Rs320 over the coming months.
Bata India: BUY| Target Rs635| Stop Loss Rs510| Upside 17%| Time Frame 3 months
The sharp up move from the December 2016 low of Rs400 saw the stock register a resolute breakout above the long-term trendline resistance joining the major highs since January 2015.
After the major breakout rally, the share price moved into a sideways consolidation phase and marked time between the broad range of Rs590 to Rs520 levels over the last two months.
We believe the two months consolidation above the major trendline breakout area has laid the foundation for the next major up move going forward and the stock provides a good investment opportunity.
The stock has displayed classic attributes of change of polarity as the previous trendline resistance has reversed its role and acted as the base for the last two months consolidation.
The sideways consolidation over the last two months highlights accumulation by stronger hands above the major breakout area ahead of the next leg of up move going forward.
Rallis India: BUY| Target Rs295| Stop Loss Rs214| Upside 21%| Time Frame 6 months
The share price of Rallis India remains in a strong uptrend forming rising peaks and troughs on the long term charts. Within the structural uptrend, the stock has witnessed periodic secondary corrections that have provided fresh entry opportunities.
Recent developments on the price front suggest that the stock has concluded an elongated corrective phase and is poised to embark upon its next major up move thereby providing a fresh entry opportunity to medium term investors.
The entire corrective price action over the past two years took the pictorial form of a well defined ‘Cup & Handle’ pattern which is a bullish continuation price pattern having a positive implication on the price front upon resolution above the neckline of the pattern.
The stock registered a strong volume-led a breakout from bullish price pattern above Rs230 in early February 2017. After the strong breakout rally from Rs188 to Rs254 in just two months, the stock entered a sideways consolidation mode and oscillated between the broad range of Rs265 and Rs235.
The entire consolidation has occurred above the breakout level of | 230 highlighting the change of polarity principle as per which a significant resistance once taken out reverses its role and acts as a support for future price movement. We believe the current consolidation above the previous breakout area has laid the platform for the next up move.
We expect the share price to head towards Rs295 over the medium term being the price parity with the previous up move from Rs206 to Rs266 (266-206=60 points) added to the recent trough of Rs235 (235+ 60=295) project upside towards Rs295 levels in the medium term.
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