The Nifty has been consolidating in the broad range of 12,000-11,800 in the last two weeks. Over the past two weeks, the index has undergone healthy consolidation, aiding the daily stochastic oscillator to cool off from the overbought situation at 11,825. Over the past eight sessions, the index has merely retraced 38.2 percent of the preceding nine sessions up move (11,490–12,034). Slower pace of retracement signifies robust price structure.
Going forward, we expect the index to maintain positive bias and challenge its record high of 12,100 in coming sessions which is also the confluence with the price parity of mid-September sharp rally (10,670–11,695), projected from October low (11,090). In the process, we believe any temporary breather should be used as an incremental buying opportunity
Structurally, the index has not corrected for more than two weeks since August. In the current scenario, the index has corrected over the week and formed a higher high-higher low indicating inherent market strength. This makes us confident on revising support base upward at 11,800 as it is 38.2 percent retracement of the last leg of the up move (11,490–12,034), at 11826, current month low is placed at 11802
Nifty Midcap index has resolved out of two week’s consolidation, thereby confirming a higher base at 38.2 percent retracement of preceding six session’s up move. Slower pace of retracement signifies healthy consolidation, auguring well for the index to resolve above long term falling trend line (drawn adjoining subsequent highs of 2018), placed at 17150, indicating conclusion of corrective phase, leading acceleration of upward momentum in coming weeks.
Below are the stocks which can return 14-19 percent in next six months:
GSK Pharma: Buy | CMP: Rs 1660 | Target: Rs 1890 | Stop Loss: Rs 1535 Upside: 14% | Time Frame: 6 Months
The share price recorded a faster retracement of last leg of decline (Rs 1519-1130) as over past 15 weeks it entirely retraced preceding 28 week’s decline. This structural improvement augurs well for acceleration of upward momentum towards our earmarked target of Rs 1890 in coming months.
Structurally, the stock has formed a higher base after retracing 80 percent of 2018 rally (Rs 1010 – 1800) at Rs 1168. Key point to highlight during secondary phase is that the stock has corrected on the back of below 50 week’s average volume.
In contrast, during recent faster up move the volume has picked up and gone above 2x 50 weeks average volume, indicating revived buying demand at elevated support base.
We expect the stock to resolve higher and head towards Rs 1890 levels as it is the price parity of 2018 rally (Rs 1010–1800), projected from July 2019 low (Rs 1130), at Rs 1920 coinciding with all-time high of Rs 1936.
KEC International : Buy | CMP: Rs 279 | Target: Rs 334 | Stop Loss: Rs 248| Upside: 19% | Time Frame: 6 months
The stock has formed potential double bottom at the 61.8 percent retracement of the November 2016 to April 2018 up move (Rs 110 to Rs 443) signalling a reversal of the corrective trend and offering a fresh entry opportunity.
The up move during CY17 was on the back of strong volume of almost 1.5 times of the 12 months average volume of 1.7 crore per months whereas the correction during CY18 and CY 19 was accompanied by very thin volume suggesting larger participation in the direction of the trend.
Monthly 14 periods RSI is rebounding taking support at its previous major low signalling strength and validates positive bias in the stock.
We expect the stock to maintain its positive bias and head towards Rs 334 levels in coming months as it is 50 percent retracement of the entire decline (Rs 443 to Rs 230).
The author is Head – Technical at ICICIdirect.com
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