India’s benchmark indices had support at the 50-DMA last week, before plunging lower today. With the Nifty breaching its 50-DMA, and distribution day count at five, we moved the market in a Downtrend.
– The market status was downgraded to an Uptrend Under Pressure on December 24, and since then, the Nifty was trading range bound and unable to sustain gains.
– Now, Investors should consider booking profits in the stocks that have performed well and have advanced 20-25% from their ideal buy points. Even if the market undergoes a small correction, these stocks are more likely to consolidate. Further, stocks slipping below their 50- and 200-DMAs on above-average volumes should be sold. Consider exiting stocks that have declined 8% from your buy price.
– We will shift the market to a Rally Attempt if the Nifty establishes a bottom and stays above its recent low for three straight sessions.
– From there on, we would prefer to see a follow-through day before shifting the market back into a Confirmed Uptrend. Should this occur, the focus will be on ideas that show the best relative strength with good accumulation. The stocks that recover the quickest tend to lead the next run.
– Investors should maintain a watchlist of attractive growth stocks and wait for the market to show signs of a Rally Attempt.