Stock picks of the day for February 1, 2019

HCL Technologies: Buy| LTP: Rs 1006| Target: Rs 1125| Stop Loss: Rs 935| Upside 11%| Time Frame 6 months

HCL Technologies is one of the leading Indian IT service company with an employee count of 1.32 lakh. We believe, base formation at the lower band of three year’s long rising channel augurs well for next leg of an up move towards Rs 1125. Hence, it offers fresh entry opportunity with favorable risk-reward set-up.

The past three years’ price action has been captured in a well-defined upward sloping channel (drawn adjoining subsequent higher lows of 2016 at 708 and 736 and projected from August 2016 high 858).

Recently, prices found support from a lower band of the aforementioned channel around Rs 930 coinciding with 78.6% retracement of the last major up move 880 – 1125) at 932. Thus we believe, any corrective move towards |935 should be used as a buying opportunity.

Structurally, over the past four months, prices have retraced 78.6% of earlier four months up move (880 – 1125). Limited price wise correction along with equivalent time-wise consolidation signifies robust price structure that bodes well for next leg of the up move.

In a nutshell, we expect the stock to resolve higher and head towards our earmarked target of Rs 1125 in the coming months as it is the upper band of rising channel placed around Rs 1135 coinciding with 127.2% external retracement of the last leg of decline (1066 – 920) at 1105.

Hindustan Unilever: Buy| LTP: Rs 1756| Target: 1995| Stop Loss: Rs 1645| Upside 13%| Time Frame 6 months

FMCG universe continues to remain on strong footing as the majority of the stocks remain in a secular uptrend. In two out of three instances, the FMCG index performed well in the five months prior to elections.

The last three months price action has been taking shape of a Flag formation. The Flag is a bullish continuation pattern. Over past seven weeks, prices have retraced 38.2% of last ten weeks up move (1477 – 1870) placed at 1720. Shallow price retracement along with slower time correction signifies inherent strength that augurs well for next leg of the up move.

Thus we believe, corrective decline towards 1650 should be used as buying opportunity as it is:

a) An upward sloping trend line drawn adjoining lows of December 2016 – March 2018 of 782 – 1281) placed around |1655

b) 50% retracement up last major move (1477 – 1870) placed at 1673

The aforementioned technical evidence makes us believe, the stock would resolve out of bullish flag pattern and head towards 1995 levels in coming months as it is price parity of previous up move (1809 -1284) projected from October 2018 low of 1477, placed at 2015