Looking for momentum plays? Here's why Greaves Cotton & Jindal Steel can give 15-17% return

The Nifty midcap index is likely to enter a consolidation phase as it is seen holding 50% retracement of July-Augusts rally (13%) that would assist the index to form a higher base amid the stock specific action

Equity benchmarks extended their decline during the first three days of the current week amid prospects of an escalating trade war and weakness in the rupee against the US dollar, along with rising crude oil prices.

However, since May 2018, Nifty has not closed in red for more than three consecutive sessions. With three consecutive sessions decline behind us and index approaching its key support zone, we caution against going aggressively short at lower levels.

We expect the index to find buying support between 11,200 and 11,100 and hence reiterate our stance of utilizing current breather to accumulate quality stocks.

We believe that the Nifty in the coming weeks is likely to continue with consolidation in the broad range of 11,200-11,600. The index has major support in the range of 11,200-11,100 levels as it is a confluence of:

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

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

c) lower band of weekly rising channel drawn encompassing entire rally since June lows placed around 11,220

Structurally, last week’s pullback from 11,250 (273 points) is larger than previous week’s pullback (210 points) highlighting a strengthening price structure.

However, lack of faster retracement of the most recent two-day declining leg (11,600-11,200), indicates extended consolidation.

The confluence of identical highs of September 4 and 7 (11,600) and 61.8 percent retracement of the past two week’s decline (11,580) is likely to act as an immediate hurdle at 11,600.

Time wise, since the beginning of 2018, each directional leg in the Nifty has lasted for seven to eight weeks. In the present scenario, after the eight week’s rally from mid-July low of 10807, the index entered a corrective phase, thus maintaining rhythm.

However, we believe that the broad structure will stay positive as the July–August rally is larger (1,156 points) in magnitude compared to April 2018 rally (977 points).

The Nifty midcap index is likely to enter a consolidation phase as it is seen holding 50 percent retracement of July-Augusts rally (13 perecnt) that would assist the index to form a higher base amid the stock specific action.

The broader structure remains positive since the rally off July 2018 low 17,700 (of 2,388 points) is larger in magnitude than March-May 2018 (2,027 points). Hence, one should focus on accumulating quality stocks in a staggered manner in the ongoing corrective phase

Here is a list of top two stocks which could give 15-17% return in next 6 months:

Greaves Cotton: Buy| CMP: Rs 153| Target: Rs 180| Stop Loss: Rs 142| Return 17%| Timeframe: 6 months

The share price of Greaves Cotton has seen a steady up move since April 2018 as it rebounded from the major support area of Rs 115-120 which is being the lower band of the last three year’s consolidation.

The stock is currently forming a higher peak and higher trough on all time frames highlighting a robust price structure.

During August 2018, the stock has registered a resolute breakout above the falling channel containing the entire price activity of the last 14 months from the all-time high (179).

It is seen sustaining above the breakout area in the last five weeks, thus supporting the positive bias and offers a fresh entry opportunity in the stock

Going ahead, we believe the stock would hold the Rs 143 level as it is the confluence of the following technical parameters. Observation:

a) the consolidation area of August 2018 is around Rs 144

b) 50 percent retracement of the previous up move from Rs 120 to Rs 165 is also placed around Rs 143 level

We expect the stock to continue its positive momentum and test levels of 180 as it is the price parity of the previous up move from Rs 120 to Rs 158 (38 points) added to the recent low of Rs 142 projecting upside towards Rs 180 (142+38=180)

Jindal Steel & Power: Buy| CMP: Rs 233| Target: Rs 268| Stop Loss: Rs 220| Return 15% | Time Frame: 1 month

The share price of Jindal Steel & Power has recently registered a resolute breakout above the downward sloping trend line joining the high of January 2018 (Rs 294) and May 2018 (Rs 265).

This signals positive bias and resumption of up move, thus offering a fresh entry opportunity to ride the next up move in the stock.

During the previous month, the stock rebounded taking support at the 200-week EMA and 80 percent retracement of the previous major up move (Rs 158-294) signaling a positive price structure.

Immediate support for the stock is around Rs 221 level as it is the recent breakout area and the bullish gap area of September 14, 2018

Among oscillators, the weekly MACD has generated a buy signal as it moved above its nine period’s average, thus supporting the positive bias in the stock.

We expect the stock to continue its positive momentum and test the level of Rs 270 as it is the 80 percent retracement of the entire decline (Rs 294 to Rs 177) at Rs 270.

Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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