Stock picks of the day: 11,000 defended on weekly basis, further relief likely

At this juncture, the pragmatic approach would be to take one step at a time and focus more on individual stocks.

 

Amid global uncertainty, our markets concluded the week with a smart recovery on August 9. Fortunately, we managed to defend the 11,000 mark on a weekly closing basis.

Firstly, the index tested the 61.8 percent retracement level of the previous up move. This point coincided with the '89-EMA' on the weekly chart as well as 161 percent (Golden Ratio) of the recent small up move from 11,108.30 to 12,103.05.

Also, the ‘RSI-Smoothened’ oscillator on a daily chart had reached the lowest level since October 15, 2018.

All these key observations were hinting towards the possibility of some relief from the crucial junction of 10,800.

Hence, we avoided shorting and kept focusing on some probable short-covering candidates. The strategy played out well and we are back above 11,100.

But, the real question lies whether the worst is over or not? In our sense, it would be too early to comment on this and although we have paused near a crucial technical cluster of supports, we need to wait for some further confirmation.

As of now, one should construe this rally as a relief move and going ahead, 11,200 – 11,300 are the levels to watch out for.

If we manage to surpass this wall, the next possible resistance is placed in the zone of 11,450 – 11,500. At this juncture, the pragmatic approach would be to take one step at a time and focus more on individual stocks.

On the lower side, the immediate support is seen around 11,062 – 10,975 and with a broader view, as long as we are defending 10,782 – 10,750, there is no reason to worry for.

Here is a list of top two stocks which could give 4-12 percent return in the next three to four weeks:

Motherson Sumi: Buy| LTP: Rs 107.35| Target: Rs 120| Stop Loss: Rs 99| Upside 12 percent

Last 1-1/2 years have been a challenging period for the auto and auto ancillary stocks. This stock has been experiencing relentless sell-off ever since it reversed after clocking its record high of 258.01 in December 2017.

With extended correction at the midst of the week, the stock retested its 2016 lows of 88.07 and had a sharp recovery to form a ‘Bullish Hammer’ on the daily chart on August 8.

On the following day, we witnessed a sharp short recovering rally of nearly 10 percent which confirms its short term reversal.

Considering the price and volume activity, we expect an extension of this relief move in the coming days. Hence, we recommend buying this counter for a target of Rs 120 and the stop loss should be fixed at Rs 99.

HDFC: Buy| LTP: Rs 2,211.65| Target: Rs 2,285| Stop Loss: Rs 2,175| Upside 4 percent

Since Budget day, we have witnessed a massive correction in some of the marquee names that have shown gravity-defying moves over the past year and a half.

These are the ones which propelled the index beyond the 12,000 mark. HDFC clearly has been one of those handfuls of stocks.

The stock prices retested its previous breakout points and have given a stellar recovery in the week gone by. The daily and the hourly chart looks encouraging and considering the overall price development, we will not be surprised to see this stock extending this relief move.

Thus, traders can look to initiate longs for a target of Rs 2,285 and the stop loss should be fixed at Rs 2,175.

MORE WILL UPDATE SOON!!