Stock picks of the day for August 30, 2018

ITC: Buy| CMP: Rs 312| Target: Rs 345| Stop Loss: Rs 285| Return 11%| Time Frame 6 months

The share price of ITC has generated a resolute breakout above the rectangle pattern, thereby confirming strong base formation around Rs 250, in turn resulting in a resumption of the primary uptrend.

Currently, the stock is consolidating at a higher level to work off the excess formed during last month’s sharp up move. We believe that the recent price activity signals a continuance of ongoing primary uptrend thereby offering a fresh entry opportunity for medium term investors.

During July 2018, the stock witnessed a strong rally gaining from 260 to 307 level. In the process, it gave a breakout from the past one year’s consolidation.

After a strong breakout rally, the share price is seen taking a breather over the past three weeks. The temporary pause after a sharp rally has helped the share price to cool off the overbought conditions and in the process built a higher base, which would now act as a launch pad for next leg of the rally.

This overall price action has taken a shape of a bullish Flag formation. A resolute breakout from the bullish Flag pattern during the current week suggesting a continuance of the recent uptrend after the conclusion of the temporary breather that provides a fresh entry opportunity with a favourable risk-reward.

We believe that the stock has a strong base around Rs 295 levels as it is the breakout area of the last one-year consolidation that also coinciding with bullish gap area of 27th July 2018 placed around 295 levels.

The overall price development makes us believe the stock is set to resolve higher towards our target of 345 being the 80% retracement level of the entire secondary phase of correction (368-250), placed around 344.

State Bank of India: Buy| CMP: Rs 309| Target: Rs 341| Stop Loss: Rs 278| Return 10%| Time Frame 6 months

The share price has rallied 30 percent during mid-July–August 2018 despite a host of negative news, signifying stock resilience. As a result, it maintained a higher peak and trough formation on the weekly chart signalling persistent buying demand at elevated levels.

We believe the corrective consolidation over the past two weeks has helped prices to cool off the overbought situation. The recent price activity signalled a fresh entry opportunity for medium term investors to ride the next leg of the up move within the ongoing uptrend.

In line with our view, the share price has witnessed a robust up move during mid July–August 2018. Since then, it has undergone a secondary corrective phase.

Currently, prices have been consolidating in the range of 290–309 after retracing 50% of the last leg of up move (250–326), placed at 288.

We believe the ongoing healthy consolidation would help the stock to form a higher base formation, boding well for a resumption of the primary uptrend.

Thus, we expect the stock to hold the key value area 278 in coming weeks, as it is a confluence of 52 weeks EMA placed at 275 and the 61.8% retracement placed around 279.

We expect the stock to resolve higher from here on and head towards 341 as it is a confluence of multi-year resistance of 351 coinciding with a 52-weeks high of 351.

Majesco: Buy| CMP: Rs 515| Target: Rs 598| Stop Loss: Rs 448| Return 16%| Time Frame 6 months

The share price of Majesco during July 2018 has formed a higher base around 400 levels being the confluence of the 61.8% retracement of the previous major up move from 304 to 603 and the previous breakout area of September 2017.

The stock has seen a sharp up move from the support area of 400 and the entire price activity of the last four weeks has taken the shape of a Bullish Flag as can be seen in the adjacent chart.

The stock is on the cusp of the bullish flag breakout and offers a fresh entry opportunity to ride the next leg of up move in the stock.

Time-wise, the stock retraced 80% of its previous 12-weeks decline (581-401) in just four weeks signaling strength and reversal of the corrective trend and resumption of fresh up move.

The weekly MACD has generated a bullish crossover above its nine periods average thus validates the positive bias in the stock.

The current up move in the last four weeks was supported by the strong volume of almost double of the 10 weeks average volume of 4 lakhs share per week signalling larger participation in direction of the trend.

We expect the stock to continue with its positive trend and head towards 603 levels as it is the measuring implication of the Flag breakout which also coincides with the January 2018 high placed at 603 levels.