Podcast | Stock picks of the day: Hold Nifty Longs with strict stop loss of 10,900

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Any close above 11,200 would trigger short-covering rally towards 11,287 and 11,440.




For the last nine trading sessions, Nifty has been gradually moving up. Nifty has seen a fall of 1,321 odd points from the all-time high of 12,103, registered on June 3, to the recent low of 10,782.


By joining daily lows, upward sloping trend line projects the strong support at 10,900 odd levels.

If we were to take 38.2 percent and 50 percent retracements of this entire swing, it comes at 11,287 and 11,440.

Nifty is currently placed below its 20, 50, 100 and 200 DMA. The index has been maintaining lower tops and lower bottoms on the daily and weekly charts. This setup indicates that the overall trend has been bearish for Nifty.

The 20 days EMA (11,138) and 200 DMA (11,183) are the near-term hurdles for the Nifty.

After the budget day, Nifty attempted crossing 20 days EMA but failed to do so. On August 19, also, Nifty found resistance on its 20 days EMA.

Considering the above development, we can say that Nifty has got stiff resistance in the range of 11,138-11,183.

It has been oscillating between 10,900 and 11,200. Until and unless we see Nifty breaking this range on either side, we may see selling at the higher band and buying at the lower band with lack of momentum.

Any level above 11,200 would trigger sharp short covering in the Nifty, which could extend the rally towards the next resistance of 11,287 and 11,440.

Last week, we saw Put writing being added at 10,900 strike price in Nifty.

Pullbacks are part of the bear markets and currently, Indian Equity markets are in that phase. During this phase, keeping a tight stop loss in long positions is very important. Discipline must be maintained during pullback.

In the present scenario, stop loss in Nifty should be 10,900. It is advisable to hold longs in Nifty with a strict stop loss at 10,900. Any close above 11,200 would trigger short-covering rally towards 11,287 and 11,440.

Here is a list of top three stocks which could give 8-11 percent return in the next one-three months:

MCX India: Buy | LTP: 865 | Stop Loss: Rs 830 | Target: Rs 935 | Upside 8 percent

MCX has been the consistent outperformer in the uncertain market. The Stock is trading in Rs 100 range for the last five months.

Any level above Rs 880 would be a big breakout on the weekly and monthly charts. The stock is trading above 50, 100 and 200 DMA, which indicates that stock is in a bullish trend on all time frames.

Considering the technical indicators discussed above, we recommend buying the stock at the current market price for the target of Rs 935, keeping a stop loss at Rs 830 on a closing basis.

Hero MotoCorp: Buy | LTP: Rs 2,637 | Stop Loss: Rs 2,500 |Target: Rs 2,800 | Upside 6 percent

The stock has surpassed a crucial resistance of its 50 and 100 days moving averages. It has outperformed the entire auto sector in August and is on the verge of forming a bullish engulfing pattern on the monthly charts.

Indicators and oscillators have been showing strength on the daily and weekly charts. Considering the technical evidence discussed above, we recommend buying the stock at the current market price for the target of Rs 2,800, keeping a stop loss at Rs 2,500 on a closing basis.

Marico: Buy | LTP: Rs 394.95 | Stop Loss: Rs 380 | Target: Rs 423 | Upside 7 percent

The stock has registered a new all-time high above Rs 401. It has been rising with the increasing volumes. On the weekly chart, it has broken out from the consolidation and is trading above all important moving averages.

FMCG, as a sector, looks strong on short term charts. Considering the technical evidence discussed above, we recommend selling the stock at the current market price, for the target of Rs 423, keeping a stop loss at Rs 380 on a closing basis.


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