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Nifty down 8% from highs; top 3 stocks which could give up to 15% return in 3 months

The current corrective decline of the last two sessions offers an incremental buying opportunity in a staggered manner, as we expect the Nifty sustaining above key support base of 10300 being the confluence of the following technical parameters:

The Nifty50 rebounded from its crucial support area of 10,300 and tested the upper band of the current consolidation placed at 10,650 levels last week.

An important observation in the recent up move is that the index has retraced its previous decline of five sessions from 10,618 to 10,303 in just three sessions.

Faster retracement of the last falling segment indicates strength in the up move. We believe the index will continue with the current consolidation in the range of 10,650-10,300, which will make the markets healthier and offer an incremental buying opportunity.

Since December 2017 Nifty has maintained the rhythm of not correcting for more than 2-3 sessions. In the current scenario, Nifty has already corrected for the last two sessions after testing the resistance area of 10,650, we expect the index to resume primary uptrend after the next 1-2 days of a breather.

The past three week’s price action has taken a shape of a double bottom formation. Going ahead, a decisive close above 10,650 would confirm the breakout of double bottom formation that will pave the way for an extended pullback to 10,830 being 61.8% retracement level of the last leg of down move (11,172-10,276).

Price wise, the index has already corrected 8 percent from the January 2018 high of 11,172 and has seen a strong bounce back from the support area of 10,300.

The current corrective decline of the last two sessions offers an incremental buying opportunity in a staggered manner, as we expect the Nifty sustaining above key support base of 10,300 being the confluence of the following technical parameters:

Placement of key support trend line (drawn adjoining Gujarat election result panic low of 10,075 followed by February panic low 10,276), placed near 10,340 should act as crucial support.

The lower band of broader consolidation at 10,300 coinciding with 80% retracement last leg of up move (10,075-11,172).

Here is a list of top 3 stocks which could give up to 15% return in 1-3 months:

Mahindra CIE Automotive: BUY| CMP Rs239| Target Rs270| Stop Loss Rs216| Return 13%| Time Frame 3 months

Mahindra CIE Automotive recently saw a sharp up move from near support area of Rs200 and registered a breakout above the falling trend line joining highs of December 2017 (Rs271) and January 2018 (Rs259) at Rs229 in current week’s trade signalling a reversal of corrective trend and offers fresh entry opportunity to ride next up move in the stock.

The stock has formed a 52-weeks high of Rs271 during late December 2017. Since then, it has been in a corrective trend for the last month and tested the major support area of Rs200 during early February 2018. A sharp up move in the last four weeks from the support area signals formation of a higher bottom on the long-term chart. The major support is on the basis of the following technical observations:

a) A lower band of the rising channel in place since CY16 is placed around | 200 levels
b) 61.8% retracement of the entire previous up move (| 157-271)
c) The long-term rising 200 weeks EMA, which has acted as a strong support during CY16 consolidation is also placed around | 200 levels

The aforementioned technical observations make us believe the stock is likely to move higher, thus providing a fresh entry opportunity. We expect the stock to test our projected target of 270 in the short term as it is the upper band of the rising channel in place since CY16 and the recent high of December 2017 placed at 271.

Ipca Laboratories: BUY| CMP Rs673| Target Rs775| Stop Loss Rs621| Return 15%| Time Frame 1 months

The share price of Ipca Laboratories has recently registered a resolute breakout above the 21 months consolidation range of Rs400-650 signalling resumption of up move and offers fresh entry opportunity.

The entire consolidation of the last 21 months has taken the shape of a double bottom and the breakout above the double bottom pattern signals end of the secondary corrective phase and resumption of the primary uptrend.

The weekly MACD is in strong uptrend forming higher high and higher low and is seen rebounding taking support at its nine period’s average thus validates positive bias in the stock in the short term.

Based on the aforementioned technical observations, we believe the stock has concluded a healthy corrective phase and is set to embark upon its next up move going forward.

We expect the stock to head higher towards 790 levels being the 161.8% external retracement of the entire previous decline (642-400) placed around Rs790 levels.

Prism Cement: BUY| CMP Rs126| Target Rs142| Stop Loss Rs114| Return 13%| Time Frame 1 months

The share price of Prism Cement is in strong uptrend forming a higher peak and higher trough in the long-term chart. The stock formed all-time high of |159 during January 2018, since then it has witnessed a corrective decline in the last five weeks and is currently placed near major support area thus provides fresh entry opportunity.

The stock is forming a base around the major support area of 115-120 as it is the confluence of the short-term trend line support joining the previous major lows since December 2016 (| 73) and the rising 52 weeks EMA currently placed at 116 levels.

After the current consolidation stock is likely to head higher towards 142 levels being the 61.8% retracement of the entire decline (159 to 115). The weekly RSI is currently placed near its previous lows and is likely to support the pullback in the stock in the coming week

Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. The views and investment tips expressed by investment experts on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
 www.shristocktips.com

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