‘Technical setup for Indian markets bullish; target for Nifty at 12,430’


Nandish Shah

After a highly volatile Friday, Nifty resumed its uptrend again by surging 166 points to close at an all-time high level of 12,089 on Monday (June 3).

The index has not even broken its 5-day EMA for the single time since May 17. So, the bullish trend is intact.

The momentum indicators and oscillators have been showing strength on the charts. The Nifty has formed a “Cup and Handle” pattern on the weekly charts, which indicates the continuation of the primary bullish trend after running correction.

The target for the Nifty is seen at 12,430, which happens to be 138.2 percent Fibonacci retracement of the entire swing seen from 11,760 (Aug 2018 top) to 10,004 (Oct 2018 bottom). As far as support is concerned, it is placed around 11,800 for the Nifty.

In the derivatives and in the stock futures segment, the open interest in terms of a number of shares at the beginning of the June series stood at three series low at 431 crore though Nifty and Bank Nifty closed at an all-time high. This was 18 percent lower than the 523 crore, the all-time high OI in February last year.

Lower stock futures OI despite indices being at all-time high augurs well for the markets going forward.

The Nifty Midcap and Smallcap indices have developed golden crossover on the daily charts. This means 50-DMA has crossed-over 200 DMA. A golden cross is a sign of medium to long term bullish trend reversal.

For the last one year, the performance gap between mid and largecaps has widened significantly and the same is expected to narrow down gradually from here.

To conclude, though the global market setup is weak, technical setup for Indian markets indicates a continuation of the bullish trend.

Traders should remain long in Nifty and Bank Nifty with the trailing stop loss of 11,800 and 31,100, respectively. The target for the Nifty and Bank Nifty can be 12,430 and 32,600, respectively.

Here are three stocks that could give 6-10 percent return in the next one month: Godrej Consumer: Buy| LTP: Rs 707| Target: Rs 750| Stop loss: Rs 680| Upside: 6 percent

After forming multiple bottoms around Rs 630, Godrej Consumers reversed northward to close at the highest level since March 2019.

On the daily chart, the stock price gave a breakout with the higher volumes. FMCG as a sector seems to have bottomed out on the charts and is looking good for 5-10 percent upside.

Godrej consumer stock price has crossed its 5 and 20-day simple moving averages, indicating a short-term trend has turned bullish. Therefore, we recommend buying Godrej Consumer for the upside target of Rs 750, keeping a stop loss at Rs 680.

PFC: Buy| LTP: Rs 128| Target: Rs 140| Stop loss: Rs 120| Upside: 9 percent

The stock price has broken out on the daily charts by closing above the resistance level of Rs 125 to close at 18-month high. The stock price has formed a bullish higher top higher bottom formation on the weekly charts.

Oscillators and momentum indicators like RSI and MACD is showing strength in the stocks on the daily and weekly charts.

The stock price is trading at 52-week high and is likely to remain an outperformer in the coming days. Therefore, we recommend buying PFC for the target of Rs 140, keeping a stop loss at Rs 120.

JK Lakshmi Cement: Buy| LTP: Rs 386| Target: Rs 425| Stop loss: Rs 365| Upside: 10 percent

After giving a breakout on the daily chart on May 27, the stock price has witnessed a sideways movement since the last four trading sessions.

The primary trend of the stock is positive as it is trading above its 20 and 200-day SMA. Oscillators and momentum indicators like RSI and MACD are showing strength on the daily charts.

Cement as a sector looks good on the chart. We believe that recent consolidation in stock price is a good buying opportunity for the traders to accumulate long positions. Therefore, we recommend buying JK Lakshmi Cement for the target of Rs 425, keeping a stop loss of Rs 365.

The author is Senior Technical & Derivatives analyst at HDFC Securities.

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