The Nifty on October 16 traded in a narrow range and formed a Doji candlestick pattern, which shows indecision among traders.
The current ongoing formation in the benchmark index suggests a V-shaped reversal pattern that will get completed around 11,700 levels.
In the last two weeks, the Nifty was trading between its 50 and 100-day simple moving average (SMA) on the daily interval.
On October 16 due to a gap-up opening above 11,400, it witnessed a breakout on the upper side of the band, which is a positive sign.
Going forward, 11,100 will act as immediate support for the Nifty. On the higher side, 11,700 will be the next resistance for the benchmark index.
A decisive break above 11,700 will definitely offer a range breakout, which will further open the gates for the index to retest 12,000 levels. A failure to sustain above the 11,100 mark will bring a fresh round of selling in the market.
Here is a list of top three stocks which could offer 6-8 percent returns in the next three-to-four weeks: Godrej Consumer Products: Buy| CMP: Rs 706| Target Rs: 766 |Stop Loss Rs 670|Upside 8.5%
Godrej Consumer has witnessed falling trendline breakout on the daily time frame. The stock is currently trading above its medium-term exponential moving averages (20, 50, 100-DMA) on the daily timeline which is a positive sign for the counter.
Recently, on the higher time frame (weekly), the stock has given a “Falling Wedge Pattern” breakout at Rs 680 levels. The initial tendency of a Falling Wedge pattern is to give a reversal from the ongoing bearish momentum.
The momentum oscillator, RSI (14) is well poised above 60 levels with a positive crossover which shows that bullish momentum can be continued further.
Traders can accumulate the stock in the range of Rs 703 – 709 for the target of Rs 766, and stop loss below Rs 670 on a daily closing basis.
Finolex Industries Ltd: Buy| LTP: Rs 599.55| Buy range Rs 580-570| Target: Rs 638 | Stop Loss Rs 550 | Upside 6%
The stock has been consistently trading above its long-term moving averages on the daily interval and is seen trading with a formation of the higher highs and higher bottom since May 2019.
On the weekly time frame, the stock has witnessed a breakout above a “Falling Channel Pattern” which is placed at around Rs 580 levels.
A recent spurt in prices was supported with above-average volumes, which adds more confirmation for a valid breakout. The majority of technical indicators and oscillators are suggesting that the momentum is likely to continue.
Traders can accumulate the stock on dips in a range of Rs 580 – 570, for the target of Rs 638, and a stop loss below Rs 550 on a daily closing basis.
Exide Industries: Sell| LTP: Rs 182.95 | Target Rs: 167|Stop Loss: Rs 192 | Downside 8%
Since August 2018, Exide Industries is trading in a lower high, and lower low formation till date. The prices have recently capped near its trendline resistance and have resumed their downward journey.
The stock is currently trading in a Falling Channel Pattern on the weekly interval. Since the recent past, 100-EMA is acting as a major resistance for the stock and currently it is trading well below its 20, 50 & 100-EMA on the weekly charts which is negative for the prices.
The momentum oscillator RSI (14) is in a bearish range shift reading in the range of 50 – 25 with negative crossover, which is negative for the counter.
The stock may be sold in the range of Rs 181.50 – 184 for the target of Rs 167, and a stop loss above Rs 192.
(The author is Technical Research Analyst, Bonanza Portfolio Ltd) Disclaimer: 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.