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Percentage of small and mid-cap stocks trading below 20-DMA down to 57% from 83%: Anand James

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The percentage of small- and mid-cap stocks trading below 20-DMA fell to 57% from 83% last week, indicating pullback attempts, says Anand James, chief market strategist at Geojit Financial Services.

However, the percentage of stocks closing below the 30-day low increased from 2% last week to 9%, indicating that the recovery we have seen among SMIDs recently is not yet widespread, a- he declared.

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Edited excerpts from a discussion:

After the strong rally seen especially in Thursday’s expiry, what does the bigger picture look like for the April series which will also mark the start of voting for the Lok Sabha election?

Over the last 10 years, 60% of the time, Nifty50 gained an average of 5% in April. If we look at election results over the last 20 years, 75% of the time, Aprils have been positive. The major contributors to Nifty50 this month were autos and banks, which contributed around 43% to Nifty. We have not seen much participation from the IT, energy and oil sectors, which together contribute around 27% to Nifty.

These sectors need to get rid of their problems to give momentum to the benefits of Nifty. There is an urgent need for more players to take center stage, as Thursday saw a clear case of trade being rejected in the face of a record peak. It was evident that while traders were keen on bargain hunting at the start of the week, this ultimately forced a short covering rally as the week progressed, with urgency brought on by the he derivatives expiration, the drop from the record high illustrates a strong reluctance to chase. higher prices. This is not, however, a pure and simple signal of collapse, but we would need to exceed 22,350-22,410 to nourish the hope of a push to 22,700-23,000. On the other hand, we have important support near 22200 and 22050, which could ensure that we do not see a collapse per se. That said, the real risk is that momentum remains away from one side or the other, for at least a week, before the earnings numbers arrive.

Steady buying was seen in mid and small caps during the week. Do you think the green zone continues in favor of the bulls as we enter the busy earnings season in April?

The percentage of small and mid-cap stocks trading below 20 DMA fell to 57% from 83% last week, indicating pullback attempts. However, the percentage of stocks closing below the past 30-day low increased from 2% last week to 9%, indicating that the recovery we have seen among SMIDs recently is not yet widespread. That said, the MACD crossover we relied on last week to hope for outperformance against larger stocks is maturing well, building confidence in the possibility of further upside play. A similar positive crossover is also seen in the mid-cap index, encouraging us to stick to the long side.

After the sell-off in Nifty IT, do you see chances of a rebound now?

90% of IT stocks are trading below the 50-day SMAs and 40% of stocks closed below the one-month low. IT stocks have been through a rough patch since January 2024, but are poised to find some solace in April, which has been a good seasonal stretch for IT in general. In fact, 81% of the time over the last 12 years, Nifty IT has gained an average of 4% in April. Furthermore, the Nifty IT Index is nearing the 50% Fibo retracement of the October 2023 to January 2024 move, and with 30% of stocks having entered the oversold region, it may not be long before as IT increases.

ESB and Angel One were among the top gainers of the week. Which side of the profession would you pursue?

The BSE has seen a vertical rise over the last fortnight, oscillating from one end of the lower Bollinger band to the upper band, while closely following the Nifty pattern during this period. Just like Nifty did, BSE also declined from its record high on Thursday. We will start next week assuming the stock is still in a wide consolidation band and Thursday’s pullback may not extend to Rs 2,300, but we will be keen to continue rallies in case of a breakout outright above Rs 2,600. Angel One, on the other hand, had a muted Thursday, contrasting sharply with Wednesday’s big gain. We believe the slowdown near the upper Bollinger band is a sign of a potential pullback in the coming days. Long positions could therefore have a stop loss below Rs 2,860, with a target of Rs 3,350 to 3,700 within two to six weeks.

Give us your favorites of the week.

KPRMILL (CMP: 844)
See: Buy
Targets: 890 – 930
Stop loss: 814

After hitting an all-time high in November 2023, the stock is in profit-booking mode and has found a base near 720 from which a rebound is underway. There was a breakout in the Psar during the weekly time frame, as well as the MACD very close to breaking the signal line. All in favor of short-term positivity. The weekly RSI 14 is above 60, highlighting the strength of the current momentum. We expect the stock to move towards 890 and 930 in the near term. All longs can be protected with a stop loss placed below 819.

INDIACEM (CMP: 214)
See: Buy
Targets: 234 – 242
Stop loss: 203

After reaching the horizontal resistance zone in December, the stock is in correction. Last week, it formed a base around the 195 horizontal support, and a long-legged Doji formed on the weekly charts, indicating a reversal. Additionally, the MACD histogram saw signs of exhaustion at lower levels during the weekly time frame, supporting our view of a near-term pullback. We expect the stock to move towards 234-242 in the coming weeks. All longs can be protected with a stop loss placed below 203.

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