Research Desk StockBroking India ValueMax January 01, 2017 ValueMax Monthly Investment Ideas ValueMax helps clients to take a longstance on stocks from thes&pbse-100 universe. Comprising monthly technical investment ideas, ValueMax will have 10 stock recommendations, which will be issued at the beginning of every month. The selection and recommendation criteria will be based on technical analysis. ValueMax is a brief technical report on the ideas, justifying our view on the stocks and the reason for the selection. The report is also available on Karvyonline.com. Book profit/exit messages will be communicated through our trading platforms during the LIVE market under the head ValueMax. Please find the ValueMax investment ideas for January 2017. CIPLA PHARMA 568.80 BUY 535 522 616 635 GAIL ENERGY 439.20 BUY 410 400 479 498 HDFCBANK BFSI 1206.20 BUY 1160 1125 1300 1330 ITC FMCG 241.65 BUY 231 226 256 263 LICHSGFIN BFSI 559.70 BUY 530 499 626 659 MOTHERSUMI AUTO 326.45 BUY 305 297 358 376 NMDC METALS 123.40 BUY 118 112 135 139 NTPC UTILITIES 164.75 BUY 158 151 180 186 TATACHEM CHEMICALS 503 BUY 480 465 545 570 TECHM SOFTWARE 488.90 BUY 460 450 530 540 CMP:Current Market Price; SL: Stop Loss; TGT: Target Note: All charts are sourced from Spider Software. 1
CIPLA PHARMA 568.80 BUY 535 522 616 635 21 day EMA 566 540 600 50 day EMA 566 530 605 200 day EMA 562 525 625 CIPLA has significantly outperformed its most of the peers in Nifty Pharma index over last one month, where the stock recorded a marginal gain of 0.39% for the month of December 2016, where as the index has lost more than 7% during the same period. The above performance illustrates the underlying fundamental strength in the stock when the total sector is reeling under heavy pressure over last few months. After clocking a high of around 740 in the year 2015, the stock has corrected around 77% of the previous major rally and gave confirmation of an inverted head and shoulder pattern on weekly charts in the month of August 2016 and is sustaining well above it, which indicates it has completed its cyclical bear corrective phase and possible resumption of long term secular bull trend into the stock. It is one of the stocks which is resilient to correction over last few weeks, where the broader market is reeling under pressure, and we expect this outperformance to continue in the near term. On daily charts, the stock is currently forming another inverted head and shoulder pattern after a strong rally from the lows of sub 450, indicating continuation of the previous major up move is high probable. Moreover, the volumes and activity on the up side days are significantly higher when compared with down move days, which adds to the bullishness into the counter. The stock has moved above its long term moving averages and is also sustaining well above them, along with them the moving averages are also upward sloping, and also has an golden cross over, which adds to the bullish view on the stock. Our take: Considering the above data facts, we recommend short to medium term investors to enter the stock at the current levels for targets of previous major swing highs and above it to fresh 52 week highs, while any correction towards the zone of 530-535 can be utilized to average the stock keeping stop loss below previous major closing swing lows of 522. 2
GAIL ENERGY 439.20 BUY 410 400 479 498 21 day EMA 427 410 453 50 day EMA 423 403 454 200 day EMA 396 401 445 GAIL is in a strong uptrend from its multi month supports of 243 levels to its 52 week high of 456 and started to consolidate. The stock has formed a symmetric triangle pattern during the consolidation and has given breakout from the pattern with huge volumes indicating a fresh leg of rally. The stock is trading well above its 21/50/100/200 day EMA/WMA/SMA levels in daily charts as well as in weekly charts indicating strength in the counter in all time frames. On the daily charts the stock has touched its Bollinger upper band and the band is widening indicating the positive momentum in the stock. In weekly charts the price has taken support from the mean and is moving up to test upper band of Bollinger bands. Among the leading indicators, Heiken candlesticks and parabolic SAR indicates positive trend while, 14 day RSI is quoting at 60.10 and is trading above the 9 period averages indicating positive momentum in the counter. Sharp rise in natural gas price in recent times could boost the profits of the Gail in coming quarters and may help the stock to outperform. Our take: The recent price action suggests the momentum in the stock to continue in the coming month as well. Thus, we recommend buying the stock for targets of 479 and 498 levels with a stop loss placed below 400 levels. 3
HDFCBANK BFSI 1206.20 BUY 1160 1125 1300 1330 21 day EMA 1191 1170 1230 50 day EMA 1208 1145 1280 200 day EMA 1189 1125 1320 HDFC Bank Ltd. is the second largest private sector bank in India. The stock price is in a secular bull trend from last many years and still ongoing trend of higher highs-higher lows on monthly charts is not violated, indicating inherent strength in the counter, and any technical pullback provides an excellent opportunity to enter in to a stock. The fact is reflected by sheer outperformance of stock with its Index Bank Nifty, which was up by 7.4%, whereas stock gained almost 12% in last one year time frame. The stock price after clocking an all time high of 1318 in the month of Sept 16, witnessed price correction from highs and found support near its major 200-DEMA. In the said price correction, prices retraced 38.2% of move projected from the swing low of 928 to an high of 1318, and subsequently in last few trading session entered in to a consolidation mode near its major average, exhibiting accumulation near support levels. On the technical setup, 14-period weekly RSI found support above 40-level in recent price correction which reflects that bulls are in control of the counter and geared up to take prices higher in sessions to come. Also, in the recent consolidation phase, prices found support near its lower Bollinger Band (20,2,S) and in last few trading sessions managed to move and pierce its upper band, reaffirms bullish bias on daily time frame charts as well. Based on above technical annotations we expect prices to brace further and reclaim its life time high of 1318 and eventually rise in an uncharted territory over the coming month. Our take: The current technical setup and price action in the stock suggests that it is likely to strengthen in the coming month and therefore one may consider buying stock at current market price and average the stock price on any dip towards 1160 levels for the upside target of 1300 and 1330, placing a stop loss below 1125 levels. 4
ITC FMCG 241.65 BUY 231 226 256 263 21 day EMA 232 231 256 50 day EMA 235 228 259 200 day EMA 236 226 263 ITC has given double bottom break out this month, rebounding from the lower levels of 221. The stock has given closing above the resistance level of 240 in the last trading day of the month. Further, it has closed above its near term exponential moving averages on the daily as well as weekly chart. On the daily chart, the counter has made higher highs and higher lows from past few trading sessions on the back of decent volume. The stock has outperformed Nifty FMCG generating positive return of 7.17% compared to Nifty FMCG which generated the return of 5.67% during the week. On the daily chart, 14 day RSI is placed above 9 day EMA and signaling more room for upside. On the weekly chart, the stock has taken support at the lower band of the Bollinger and rebounded from that level. On the daily charts, the stock s Bollinger band is in expansion phase and started to expand over last few days, indicating more volatility and the current upward momentum is likely to continue. The Parabolic SAR (Stop & Reverse) is placed well below the price on daily chart, suggesting buying will remain intact in the counter in near term Our take The recent price action suggests that the positive momentum in the stock is likely to continue and the counter is expected to trade higher in the coming sessions. Thus, we recommend buying the stock for the targets of 256-263 levels and add further on any dip towards 231 levels with a stop loss placed below 226 levels. 5
LICHSGFIN BFSI 559.70 Buy 530 499 626 659 21 day EMA 549 545 575 50 day EMA 551 525 599 200 day EMA 527 500 630 LICHSGFIN has closed tad negative by 0.83% in last month gone by. After finding bottom at 467 made on 9th November 2016, which also ended medium term down trend after its cyclical correction in the stock from the life time high of 624.25 levels indicating its long term secular uptrend has resumed. The stock has been significantly outperforming NIFTY in the last quarter ended 31 st December 2016. On price charts the stock has come out from consolidation within the range of 385-500 levels and gave a breakout in the month of July 2016. Thereafter the stock made a life time high of 624.25 and went into correction mode along with broader market; in this correction the stock has found support around 500 levels validating the said breakout. On the daily charts the stock is trading above its medium to long term moving averages that is 50 EMA and 200 EMA indicating up trend intact in the counter. Bollinger Band (20, 2, S) set up the stock is finding support near its lower Bollinger band on the daily price chart which is pegged around 533.50 levels. RSI on weekly chart is pegged around 54 levels, indicating the stock has not yet been over bought. Even the MACD line on monthly charts is in buy mode, indicating bullish momentum likely to continue which supports to our bullish view on the stock. On the monthly charts prices are above its monthly parabolic SAR indicating long term up trend intact in the counter. Our take: Considering all the above data facts, we recommend short to medium term investors to enter the stock at the current levels for targets of around 626 and 659 levels and any correction towards 530 can be utilized to average the stock keeping stop loss below 499 levels. 6
MOTHERSUMI AUTO 326.45 BUY 305 297 358 376 21 day EMA 316 315 345 50 day EMA 315 304 358 200 day EMA 304 295 376 The stock is in a multiyear bull trend and had been consistent in making higher highs and higher lows on monthly chart. Technically, the stock has seen resistance at its 52 weeks high of 358.65 and plunged downwards. However it witnessed a support near 220-225 levels and bounced back continuing its trend of higher highs and higher lows. The stock is trading well above its 21/50/100/200 period EMA levels on daily charts as well as in weekly charts indicating strength in the counter in all time frames. On weekly chart the stock took support near 290-295 levels in the recent past and has seen a reversal in its trend to surge towards its 52 weeks high of 358.65 levels, surpassing which it may surge to the uncharted area to make new highs in the coming trading session. Among the oscillators front, the 14-week RSI has given a positive crossover to 9 period moving averages and is pegged at sub 50-55 levels, indicating the bullish momentum to continue for the near term. Even the MACD positive crossover also supports our bullish view into the counter. On the other hand, the counter is also rolling near to upper band of the Bollinger (20,2,S) on the daily chart affirming our bullish stance in the counter for medium to long term perspective. Even the Parabolic SAR is trading well below the current market price of the stock suggesting inherent strength which supports our bullish stance in this counter so for the month and the stock is expected to outperformer among other its peer group. Our take: From last few sessions the stock is comfortably trading above all its major moving average with decent rise in trading volumes. This provides an excellent opportunity to accumulate the stock at current levels for a potential upside target of 358 and 376 levels over the next one month, while any dip towards 305 levels should be utilized to average the stock, keeping stop loss below 297 levels. 7
NMDC METALS 123.40 BUY 118 112 135 139 21 day EMA 124 121 130 50 day EMA 122 118 135 200 day EMA 110 112 139 NMDC, a Government Controlled Nava Ratna Company is the largest producer and exporter of Iron Ore in the country with a total capacity more than 30 Million Tons. It is also involved in the exploration of Copper, limestone magnesite, graphite and other metals. The stock has performed in par with the Metals index over last month with the stock gaining 0.33% whereas Nifty Metal index grew by 0.28%, indicating its performance in par with the overall sector. The stock on the daily charts after forming a low of 76 has been in uptrend ever since making higher highs and higher lows taking support at the trend line drawn from lows of 76 On weekly charts the stock has seen a stellar rebound from the lows of 76 towards 142.50 levels. The positive momentum is likely to continue. On technical front the stock has been trading above its major moving averages while taking support around its 50 DEMA levels and the moving averages are upward sloping with a golden crossover indicating uptrend in the stock. On momentum front RSI (14 Period) Is trading at comfortable 50 levels and pointing northwards indicating further momentum in the stock Our take: The recent price action suggests that the positive momentum in the stock is likely to continue in the coming trading sessions as well.. Hence, we recommend buying the stock for target of 135-139 levels in the near term and look to average the stock on dips towards 118 keeping stop loss of 112 levels. 8
NTPC UTILITIES 164.75 BUY 158 151 180 186 21 day EMA 161 160 170 50 day EMA 159 155 180 200 day EMA 152 151 186 NTPC is one of our preferred counter from the Power sector. The stock has outperformed NIFTY during the last month and has generated nearly 1% return whereas NIFTY closed with a marginal negative return of 0.47%. Currently the stock is trading well above its 21/50/100/200 DEMA levels on daily chart as well as on weekly chart exhibiting strength in the counter in all time frame. The stock has posted its 52 week high of 170 levels on 19 th August 2016. Thereafter, the profit taking from the above said higher levels has dragged the stock towards the low of 143.30 levels, post which the stock has rallied nearly 17% in a short span of two months, reflecting uptrend in the stock will remain intact in coming months as well. Among the indicators and oscillators, the 14-day RSI has already given a positive crossover with 9-day signal line on the daily charts and is pointing northwards, clearly indicating the bullish trend in the stock is likely to continue and the counter is expected to head higher in the near term. The Parabolic SAR (Stop & Reverse) is comfortably trading below the price on daily chart, which reflects buying will remain intact in the counter in the near term. On the Bollinger Band (20,2,S) set up on weekly chart, the stock is trading near upper band of Bollinger Band and the band is widening, indicating that volatility has increased and the price action support that the current positive momentum is likely to continue in the stock. From the above observations it is evident that stock is likely to surge higher and outperformed its peers in coming trading weeks and heading towards the mention targets. Our take: The recent price action suggests that the positive momentum in the stock is likely to continue in the coming trading sessions as well. Hence, we recommend buying the stock for target of 180-186 levels in the near term keeping stop loss of 151 levels. 9
TATACHEM CHEMICALS 503 Buy 480 465 545 570 21 day EMA 488 495 520 50 day EMA 494 480 545 200 day EMA 475 465 570 TATACHEM has gained around 3.39% during the week whereas NIFTY 50 has gained around 2.51%. During the month, the stock has given a positive return of 4.92%; significantly underperforming the broader index i.e. NIFTY 50 which has given a marginal negative return of 0.47% month on month basis. The stock is expected to continue to outperform in the coming sessions. The stock has fallen from its 52-week highs, which also happens to be its life high, of 586.10 levels clocked in the month of October 16 and slipped towards 445-450 levels. The stock has taken support at the lower levels and has bounced back towards 500-505 levels. The upward journey is likely to remain intact in the counter and is expected to head towards the life time high once again. The volume witnessed in the stock is decent, signaling accumulation in the counter at the lower levels. The stock is trading above its 21/50/100/200-DEMA on the daily charts indicating strength in the counter. Among the indicators, the 14-day RSI has already given a positive crossover with the 9-day signal line and is pointing northwards on the daily charts, clearly indicating bullishness in the counter is likely to continue in the near term. The Parabolic-SAR is placed on the price on the daily charts, re-iterating positive biasness in the counter. Our take: The recent price action suggests that the positive momentum in the stock is likely to continue and the counter is expected to trade higher in the coming sessions. Thus, we recommend buying the stock for the targets of 545-570 levels and add further on any dip towards 480 levels with a stop loss placed below 465 levels. 10
TECHM SOFTWARE 488.90 Buy 460 450 530 540 21 day EMA 472 470 500 50 day EMA 464 460 530 200 day EMA 476 455 550 The stock is in a multiyear bull trend and had been consistent in making higher highs and higher lows on monthly chart from last many years. Also the stock is in a consolidation range, ranging from 569 levels on the downside to 589 levels on the upside on weekly chart, any breakout on the from the current level would take the stock touch new highs. On the monthly charts the stock has been trading upwards only for the past couple of months which suggest that the stock in the coming months might outperform its peers. On weekly chart the stock has taken a support placed around its long term moving average which suggest that the. The stock has been comfortably trading with positive bias from past few trading weeks and has been making higher highs for almost every week clearly indicating that the stock is very strong. On daily chart the stock is well placed above all its major moving averages (21, 50, 200 DEMA) indicating the stock to be in a bull run. RSI on weekly chart is pegged at sub 60 levels, indicating the bullish momentum to continue for the near term. Even the MACD positive crossover also supports our bullish view into the counter. On the other hand, the counter has just started its journey by rolling on the upper band of the Bollinger (20,2,S) on the daily chart affirming our bullish stance on the counter for medium to long term perspective. Our take: This provides an excellent opportunity to accumulate stock at current levels for a potential upside target of 530 and 540 levels over the next one month, while any dip towards 460 levels should be utilized to average the stock price, keeping stop loss below 450 levels. 11
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