Weakness in the general market persisted throughout the session. Nifty staged a downside reversal and broke below its 50-DMA (9,778). However, we will not consider today’s move as a distribution day as volume was low compared to Friday’s session. Last week, there were two additional follow-through days. Today, Nifty undercuts low of both the additional follow-through days indicating technical deterioration.
Over the last couple of months, we discussed about identifying a correct buy point using common chart pattern/base formation such as cup-with-handle, double bottom, and flat base. Along with the type of base, it is important to understand the stages of base.
Stages begin at one and increase with each subsequent base pattern formed. The magnitude of the move between two base patterns will determine whether the stage moves numerically or alphabetically. If the price move from the pivot point of the prior base to the left side high of the current base is 20% or more, the stage will increase by a factor of 1—for example, from Stage 1 to Stage 2.
If the price move is less than 20%, the stage will increase by an alphabetic factor—Stage 1a to Stage 1b.
The base stage and count are always reset to 1 once an intraday low price undercuts the low of a previous base.
The current leaders in the market have formed both early- and late-stage bases. Base stages help investors identify the progress a stock has made in its price advance, the biggest clue to a stock’s remaining growth potential.
It is a good idea to track the number of bases a stock has formed during its current run-up. As a rule of thumb, try to buy stocks that are breaking out of the first or second base of their run. Late-stage bases are riskier. Late-stage means a base that is number three or higher in the base count.
After forming a fourth base, most growth stocks can’t rally much further, if at all. What usually follows is a long, steep slide. After a stock has had a large advance without a major correction, the probabilities are greater that institutional investors will cash in their profits and push the price into a serious decline.
By the time a stock forms a late-stage base, it is usually widely known to investors and running short on fresh buyers. In addition, the late-stage base tends to have unsteady price swings, bouts of strong selling, or other flaws. It is the chart’s way of telling you that the best buying opportunities are gone.
Late-stage patterns can work and sometimes do lead to nice gains, but you should understand that they involve more risk. If you buy a stock on a late-stage breakout, be sure to cut your losses quickly if the stock fails to gain traction and begins to head south.
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
Indian markets reacted sharply to the global cues after prices of WTI crude crashed and landed in negative territory for a while. Nifty gapped down around 250 points and traded sideways in the first half of the day’s session. Post noon, it was a cup-shaped trading session as buyers outweighed sellers. 84% of Nifty50 stocks declined today, led by Indusind Bank (Nse) (-12.3%) and Bajaj Finance (-9.1%). On the flip side, Dr Reddys Labs. (Nse) (+4.4%) and Bharti Infratel (+2.3%) were the major advancers.
Nifty escaped distribution as today’s volume was slightly lower than that of the previous session.
Barring Nifty Pharma (+2.5%), all the sectoral indices closed lower. Nifty Pvt Bank (-5.9%), Bank (-5.4%), and Nifty Auto (-5.3%) were the major decliners. Nifty Metal and Media indices closed more than 5% lower. Of 2,115 stocks traded, 495 advanced, 1,311 declined, and the remaining traded flat.
We continue to be very selective about taking any fresh positions. It is important that investors don’t play all their cards at once. We would suggest adopting an investment approach where you begin with a small allocation and increase it as and when the market advances further.
Without trying to predict and decode stories, we will take what the market gives us and continue to monitor unfolding conditions. Stocks with higher relative strength and superior fundamentals can do well. Some leading stocks have sharply corrected. Wait for them to put in at least a short period of consolidation and show a constructive breakout from that range. Buying without this period of constructive behavior into a straight upmove off the bottom, puts you at a risk of drawdown.
Key News
Icici Bank The stock declined sharply after reports of $100M exposure to Ocean Tankers, a unit of Singapore oil-trading firm Hin Leong Trading.
Morepen Laboratories: Its shares hit an upper circuit after the company received license to manufacture Hydroxychloroquine from Himachal Pradesh State Drug Controller.
IT stocks came under pressure as the U.S. President tweeted about plans of temporary suspension of immigration.
Aurobindo Pharma The USFDA classified its unit IV of Hyderabad as voluntary action indicated (VAI).
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
After opening more than 100 points higher, Nifty succumbed to profit booking and ended flat. It was a highly volatile trading session. Only 28% of Nifty50 stocks advanced today, led by Tata Motors (+4.7%) and Sun Pharm.Industries (+3.6%). On the flip side, Hindalco Industries (-6.2%) and Jsw Steel (-5.5%) were the major decliners.
On the sectoral front, it was a mixed reaction. Nifty PSU Bank (+4.2%) and IT (+1.6%) were the major advancers. On the other side, Nifty Metal (-3.3%) and FMCG (-2.1%) were the major decliners. Of 2,125 stocks traded, 1,150 advanced, 683 declined, and the remaining traded flat.
We continue to be very selective about taking any fresh positions. It is important that investors don’t play all their cards at once. We would suggest adopting an investment approach where you begin with a small allocation and increase it as and when the market advances further.
Without trying to predict and decode stories, we will take what the market gives us and continue to monitor unfolding conditions. Stocks with higher relative strength and superior fundamentals can do well. Some leading stocks have sharply corrected. Wait for them to put in at least a short period of consolidation and show a constructive breakout from that range. Buying without this period of constructive behavior into a straight upmove off the bottom, puts you at a risk of drawdown.
Key News
DGCA has ordered airlines not to take bookings from May 4 as the final decision is awaited. Shares of Interglobe Aviation (-6%) and Spicejet (-1.7%) have declined sharply.
Fitch has downgraded India’s economic growth forecast for FY21 to 1.8% from 4.6% previously.
Wockhardt received the Qualified Infectious Disease Product (QIDP) designation for its novel antibiotic WCK 6777 from the USFDA.
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
Nifty, after a negative opening, closed the day around 70 points higher. It made an intraday high of 9,053 and closed below 9,000. Today, 70% of Nifty50 stocks advanced, led by Ntpc (+5.8%) and Vedanta (+5.2%). On the flip side, Hcl Technologies (Nse) (-3.9%) and Tech Mahindra (-3.9%) were the major decliners.
Barring Nifty IT (-1.9%) and FMCG (-0.6%), all the sectoral indices closed higher. Nifty Media (+2.6%) and Nifty Bank (+1.8%) were the major advancers. Of 2,116 stocks traded, 1,331 advanced, 462 declined, and the remaining traded flat.
We continue to be very selective about taking any fresh positions. It is important that investors don’t play all their cards at once. We would suggest adopting an investment approach where you begin with a small allocation and increase it as and when the market advances further.
Without trying to predict and decode stories, we will take what the market gives us and continue to monitor unfolding conditions. Stocks with higher relative strength and superior fundamentals can do well. Some leading stocks have sharply corrected. Wait for them to put in at least a short period of consolidation and show a constructive breakout from that range. Buying without this period of constructive behavior into a straight upmove off the bottom, puts you at a risk of drawdown.
Key News
Larsen & Toubro received ‘significant’ orders during January-March quarter. ‘Significant’ category orders range between Rs 1,000 crore and Rs 2,500 crore.
Vodafone Idea enhanced network capacity in the Delhi-NCR circle by deploying the most efficient 900 MHz spectrum band on 2,300 4G sites to cater to rising demand amid coronavirus lockdown.
IL&FS sold its 100% stake in IL&FS Wind Power Services to ORIX Corporation, Japan for Rs 6.05 crore.
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
