Looking for momentum plays? Top three stocks which could give 15-23% return in 6 months

We expect Nifty to extend its consolidation phase over the next few weeks in the broad range of 11,650-11,200 amidst the stock specific action, says Dharmesh Shah of ICICI Direct.com Research

ICICI Direct.com Research

Equity benchmarks snapped their eight week’s winning streak as it witnessed profit booking amid concerns over a sharp depreciation in the rupee. Key observation since the beginning of 2018, each directional leg in the Nifty has lasted for seven to eight weeks.

In the current scenario after eight weeks of the rally from mid-July low (10,807), the index seems to have entered in a corrective phase, thus maintaining its rhythm of each directional move lasting for seven to eight weeks.

Structurally, the index has entered a corrective phase by breaching prior week’s low (11,393) for the first time in nine weeks.

Going forward, we expect Nifty to extend its consolidation phase over the next few weeks in the broad range of 11,650-11,200 amidst the stock specific action, which will help cool off some of the overbought condition developed after 11 percent strong rally in the last month.

We expect the current corrective decline should be used as a buying opportunity in the quality stocks in a staggered manner.

We expect strong demand to emerge in the range of 11,100-11,200 range, as it is the confluence of the following technical observation:

a) 61.8 percent retracement of eight weeks up move (10,807-11,760) at 11,171

b) Bullish gap recorded on July 27, 2018 (11,210–11,167)

c) As per change of polarity concept earlier high (11,172) would now reverse its role as support

d) The lower band of weekly rising channel drawn adjoining March to July 2018 lows of 9,952–10,604, projected from May 2018 high (10,929), placed around 11,120

Structurally, Nifty midcap index took a breather to cool off from the overbought situation formed during late July-August 2018 rally (13 percent).

We believe that the index is likely to enter a consolidation phase that would assist Nifty midcap index to form a higher base formation amid the stock specific action.

As the broader structure remain positive since the recent pullback of 2,388 points off July 2018 low of 17,700 is larger in magnitude than the previous pullback in March-May 2018 (2,027 points) and recently, index resolved out of bullish falling wedge pattern.

Hence, one should focus on accumulating quality stocks in a staggered manner in the ongoing corrective phase.

Here is a list of top three stocks which could give 15-23% return in next 6 months:

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