Podcast | Stock picks of the day: Midcap stocks to play catch-up to the heavyweights

Hadrien Mendonca

The market witnessed aggressive short covering on Thursday and once again Nifty50 surpassed the crucial hurdle at 11,530 zone. Going forward, if Nifty manages to close above the 11,600 resistance levels, we could expect the index to rally higher towards its previous all-time high zone.

Bank Nifty has crucial resistance of rising trendline on the larger time frame chart which is around the 30,500 zone.

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Fresh leg of the upswing is likely only if the mentioned resistance is broken on a closing basis. Till then we expect the index to marginally consolidate at the current juncture.

The Nifty Midcap-100 index has broken out from a classic Flag pattern on the daily chart. The index has also surpassed and sustained above its long term 200-DEMA which was around the 17750 zone.

Going forward, we expect the midcap stocks to play catch up to the heavyweights.

Here is a list of top three stocks which could give 7-12% return in the next month:

Syndicate Bank: Buy| Target: Rs 47| Stop Loss: Rs 41.5| Upside 9%

The stock has shown immense strength in the last seven weeks and has rallied significantly. The stock has broken out a fresh from a 'Double Bottom' pattern on the weekly chart. We expect the stock to rally towards its potential target of Rs 47 in the medium-term.

InterGlobe Aviation: Buy| Target: Rs 1540| Stop Loss: Rs 1397| Upside 7%

The stock has been consolidating for the past four trading sessions and has finally broken out from a Pennant pattern on the daily chart.

The price outburst has also been accompanied by a smart uptick in traded volumes. Hold long positions with a stop loss at Rs 1397 on a closing basis.

Dish TV: Buy| Target: Rs 44| Stop Loss: Rs 36.5| Upside 12%

The stock has been under pressure for the past three weeks and is finally on the verge of a falling channel pattern breakout on the daily chart.

Positive crossovers on the RSI and rising volumes further accentuate our bullish stance on the stock. Hold long positions with a stop loss at Rs 36.5 on a closing basis.

(The author is a Senior Technical Analyst, IIFL)

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. First Published on Mar 29, 2019 08:33 am

Amazon Stock Is Finally Breaking Out

Amazon (NASDAQ:AMZN) stock sat out most of the rally over the past few months. However, it wasn’t alone. Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) also didn’t join the rally, leaving many to wonder what was causing the hesitation. However, over the past few days, we’ve seen a big rally of Amazon stock, signaling that its slumber may be coming to an end.

Is now the time to buy AMZN stock?

Investors first have to ask themselves if they like the company or if they like the stock. Bullish investors who are purely looking to trade Amazon stock are late. Those who were prepared came into this week long and are now raising their stop-losses and locking in some gains.

However, if investors like the company, it doesn’t hurt to wait until the stock’s technicals are becoming more bullish. For investors in that camp, there are plenty of reasons to like Amazon stock.

Amazon Stock Is a Juggernaut

The best thing about AMZN stock may have been its recent cheapness. Until recently, the shares were almost 20% off their highs, and they stayed there for several months. That gave investors a chance to gobble up Amazon stock while it was on sale.

But I understand that the valuation of AMZN, as it always has been, is insane. AMZN, however, is not a traditional company and therefore it is not bound by traditional valuation metrics. I know strict, traditional investors will have a field day with that “exception to the rule” explanation, but it’s true. Some investors’ unwillingness to acknowledge such exceptions has kept them from buying the market’s biggest winners, like Amazon and Netflix (NASDAQ:NFLX).

You didn’t have to hold these names for 20+ years or buy shares during their IPOs to reap massive gains. We knew what AMZN and NFLX were all about ten years ago and could have made a massive amount of money going long AMZN stock and NFLX stock. In the last decade, Amazon stock has surged “just” 2,420%, turning $10,000 into a quarter-million dollars, while Netflix has jumped almost 6,000% in the same time frame.

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Even over the last five years — when each company’s long-term, non-cyclical opportunities had already become clear — AMZN stock and NFLX have returned about 375% and 500%, respectively. And given all of Amazon’s opportunities, owning Amazon stock is worthwhile.

Its e-commerce unit has considerable revenue and is already well-known, but its other units are garnering attention, too. Its cloud business, Amazon Web Services, has become one of the most dominant in the industry. Given its huge popularity, its ad business has also become quite attractive. It likely obtains annual cash flow of $10 billion from Prime membership fees, and its Whole Foods acquisition gives Amazon a presence in the grocery sector.

Trading AMZN Stock

Click to Enlarge From a trading perspective, the time to go long Amazon stock has come and gone. That opportunity presented itself last week before the stock’s $80 move. It’s now prudent to trim positions in Amazon stock and raise stop-losses.

For longer-term investors, AMZN stock is looking much better, now that it has exceeded its 200-day-moving average. It will look even better if it can hold that mark after this fresh breakout.

If it can stay above that level, AMZN can begin the process of pushing higher again. Once it climbs over that $1,775-ish level, which kept AMZN in check in November and December, AMZN stock can really start to fly. The next level of interest would come into play near $1,850.

Remember, cloud names have been on fire, and Amazon has a significant cloud presence. For the past few quarters, management’s outlook has kept bulls at bay. However, AMZN stock is known for gathering momentum after big declines. Amazon stock fell almost 35% from peak to trough in recent month and, historically, has gone on to post big gains after those types of stumbles.

I have no reason to bet against AMZN over the long- term. I also have no reason to bet against it in the short-term if it stays above the 200-day.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL, GOOGL and AMZN.