Outlook for the Market:

The Nifty slipped a bit on last Thursday primarily due to the session being the last day of the January derivative settlement—we had a strong bull run and on the last session there had been some profit taking, and partly due to some liquidation of positions by short-term players. In any case, the momentum is still strong when you look at the weekly chart; once you change your perspective and look at the monthly chart it would show immense strength given the price movement in this month.

In our view, unless you see the Nifty falling below 10707 decisively it is unlikely to go down in a hurry—in fact, as of now, we can expect this level to act as a floor if there were to be any significant fall at any point in time even if for a brief spell of a day or two.

We must go with the bullish trend till such time the market gives an indication that it is finally deciding to go for a course correction. However, studying a broad range of stocks that are outside the index and some of the stocks that are within it like Eicher Motors, one gets the sense that even if the Nifty does not show any correction some stocks are already in a corrective mode.

Since, it is always profitable to go with the trend, we have again chosen two stocks that present good buying opportunity at current levels with much lower risk compared to their peers. They fit well with our motto in buying stock: “Heads I win big, tails I don’t lose much.

Stock Recommendations:

ITC (281.25): Buy; short term target 294 – 299; medium term target 340 – 350.

Use a protective stop below 265 on closing price basis. I expect this stock to perform quite well during the February series for equity derivatives. Thus, our duration of the short term here means the month of February. By the way, due to the implementation of GST, this company, which had been the favorite whipping boy of the finance ministers in yesteryears, is mostly immune since now the GST council decides how that flogging should happen and it has already done that.

Dish TV (73.55): This stock has been beaten down considerably. On the surface, it would appear to be quite weak till you look at the longer-term chart given below. It is very close to its 10-year old long term trendline. Such trendlines are not broken decisively so easily. In fact, any minor breach of the trendline support level around 65 should be used as a supplementary buying opportunity if it were to come by. We are expecting a full retracement of the fall from 81 – 85, potential supply zone. Our medium-term target range is between 100 and 110. Stop-loss for short term below 65 on the close; for the medium term below 60 on the close. Buy this stock.

Standard Disclosure & Disclaimer: Take positions in the above counters with strict risk control measures in terms of strict stop-loss adherence and position-sizing should be as per the movement favourable or adverse—if favourable a large position but smaller bets are better in case of either high volatility or adverse movement.