Action post the strong 25th and 26th May rally has been lacklustre (Yet again in Thursday’s trade, Nifty formed a narrow trading range of just 45 points, unable to build on previous week’s swashbuckling move).
In Wednesday’s trade, it hit a new high of 9,650 but thereafter lacked the momentum to sustain at the top. On the downside, 180 degrees from the recent low of 9342 is placed around 9530. The same also coincides with the earlier peak (seen on 17th May 2017), acting as immediate support.
The Nifty midcap 100 index is back in focus as it rallied 0.6% in Thursday’s trade. Post a consolidation at the bottom, around the support of four-digit gann number 1702(0), the midcap index has staged a breakout which indicates more upside in the near term for the broader markets.
As the index hovers around the multiple supply points between 9600-9640, sector rotation is likely to continue. Traders are advised to use intraday dips around the support levels as a buying opportunity.
With Nifty unable to register a close above the resistance of 9640, chasing the momentum at the top won’t be the ideal approach.
Here is a list of top five stocks which can give up to 12% percent return in short term:
DCB Bank: BUY| Target Rs 225| Stop Loss 194| Return 12%
DCB Bank has been consolidating at the top after a strong rally from January to May 2017. From last one month, it has been moving sideways between Rs183 and Rs200. However, in recent phase of consolidation, the stock continues to find support around its 35-DMA.
On several occasions, it found support at the above mentioned critical moving average. In fact, the same is acting as a strong support since January 2017.
Moreover, it continues to trade above the three-digit gann number of 169, implying strength in the recent sideways phase. Since it is an up trending stock, traders should always use any phase of consolidation and also breakout from the same to build a long position.
A confirmation of a move above Rs202 would result in an upside breakout and the stock could attempt Rs225 in the medium term. Based on above rationales, we recommend a buy on DCB Bank above Rs202 with a stop loss of Rs194 and a target of Rs225.
Karnataka Bank: BUY| Target Rs196| Stop Loss 172| Return 10%
After failing to build on the momentum seen during the start of the previous month, it finally staged a breakout on the upside on Thursday. It is showing the trait of a stock which is in a strong uptrend since November 2016.
In the month of May, it went through a phase of correction after it failed to sustain above gann number of 169 and declined towards Rs154.
It took support at its 35-DMA and staged a pullback and in the process broke out above the previous peak of Rs176. Fresh breakout was seen in Thursday’s trade, suggesting resumption of the ongoing uptrend.
Up trending stocks like Karnataka Bank tend to find support at declines and also tend to recover sharply. Keeping in mind above-mentioned parameters, we recommend a buy on Karnataka Bank above Rs179 with a stop loss of Rs172 and a target of Rs196.
Colgate-Palmolive: BUY| Target Rs 1130| Stop Loss 1010| Return 9%
It is currently going through a phase of consolidation at the top of its rally. It is displaying characteristic of a stock which is in a strong uptrend. It is moving higher along with the support of its 13-WEMA since March 2017, wherein every pullback towards this critical moving average has resulted into buying opportunity.
Since April 2017, the sideways consolidation at the top of its trend can be termed as bullish consolidation. The outcome of such sideways movement is dealt positively during an uptrend.
Moreover, it continues to trade above the gann number of 961. Sustenance above the same for last one month suggests that the stock has moved into a new orbit.
However, a fresh breakout from the recent sideways activity above Rs1,045 would provide the much ammunition for the stock to ascend higher. Based on above analysis, we recommend a buy on Colgate-Palmolive above Rs1,045 with a stop loss of Rs1,010 and a target of Rs1,130.
Voltas: BUY| Target Rs 550| Stop Loss Rs 492| Return 8%
With a breakout from a pennant pattern on the daily chart, Voltas is likely to replicate the movement it had in the last week of May 2017. It rallied sharply from low of Rs403 (support of its 35-DMA) to a high of Rs502 before going into a phase of consolidation, which led to a formation of the pennant.
This pattern is normally found in an uptrend. A descending trend line extended from the peak of Rs502 has been pierced on the upside in this week’s trade, thus putting an end to the short-term downtrend. Also in the process, the stock regained ground above the midpoint of current gann channel.
Thursday’s move of 5 percent suggests the beginning of the previous uptrend. We expect the stock to witness follow-up buying and build on recent momentum. Buy Voltas above Rs509 with a stop loss of Rs492 and a target of Rs550.
Cholamandalam Finance: BUY| Target Rs1150| Stop Loss Rs 1010| Return 10%
The recent corrective phase in the counter came to an end around the start of the current gann channel. The same also coincides with the support of rising trendline which is in place since December 2016.
Moreover, on the daily chart, the stock has made a bullish ABCD pattern as it took support at the 161.8% extended move of the last leg. In Thursday’s session, the stock also attempted a breakout from the downward sloping trendline resistance.
A move above Rs1,049 would result in an end of recent consolidation phase at the bottom of last two weeks. An early confirmation is seen with regards to breakout on the daily RSI. Price confirmation is awaited on the charts. Traders are advised to initiate buy on a move above Rs1,049 with a stop loss of Rs1,010 for a target of Rs1,150.
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