Why is a big relief rally coming in Indian Stock Market Mid cap and Small cap Sector?

We had always seen couple of times that in financial market nothing is predictable and easy to analyse. All you can do is continuous learn and study new strategies and techniques.

You always have to be very alert and keep your eyes wide open to predict market movements. As very recently i had analysed new pattern. we always have to find out patterns and techniques where the risk reward ratio should be lucrative and for that i am always in hunt for new opportunities and successful trades.

SUN PHARMA CHART

New Strategy which i had recently discovered to find and take positions in panic low stocks and which are recently beaten very badly.

Dr Reddy Chart

As of late this trend i noticed and tested in Pharma stocks around last week of may 2018. And as a result Sun Pharma and Dr Reddy took a sharp U-Turn and bounced like a dead cat around 25 percent in last four weeks.

ACC CHART

And now my views could not be dismissed because the same kind of strong momentum and sharp bounce was seen in front line stocks like ACC and Ambuja cements.

AMBUJA CEMETS CHART

It was true that the momentum and intensity was not so much strong like Pharma Stocks but it was quiet motivating to see that this strategy can work if studied and research properly.

So i seriously started evaluating new stocks and even i found new opportunity was in BSE Mid-cap and BSE Small Index which are trading at Panic Low.

Now see assume one thing that i may be wrong but the charts are speaking reality and giving some hints about a possible reversal. You will not believe that this kind of reversal pattern we had seen in September-October 2017.

BSE MID CAP INDEX CHART

Its not limited to Mid cap sector but Bse small cap index is also taking support at Panic Lows. Now technically speaking from risk reward perception it is looking very fantastic. We have seen in last few weeks huge selling has happened and can assume that indian market is in huge oversold zone in Mid cap and small cap stocks and fund managers are sitting on huge cash at the moment. So in future they will deploy very aggressively in valuable companies which may result in huge stock specific short covering and may prove to be strong short term bottom for coming months.

BSE SMALL CAP INDEX CHART

Really speaking even the big analysts and market experts no one knows that levels we hold or break. But one thing is that market is not certain and we should always invest or take short term trades as a opportunity with a logical stop loss or risk appetite. In the current scenario we can put a stop loss of 5% against the 28 june 2018 lows.

This stop loss is very important because its a fine line which we draw on the sand near the beach. It is always seen that it works very well but we have very alert with the stop loss and needs to exit if it hits that line. Having studied a lot the current market scenario is very tough and risky due to global trade war and political scenario. So that is the reason i told you that if you deploy or take any position please have a umbrella that is stop loss which will fix or protect your losses and capital in worst case scenario.

Even no cannot predict accurately which stocks will rally and it often seen that the stocks which are beaten down very badly will have sharp rally the most. We think that this the best opportunity because there is strong case and possibility of a sharp upward movement in small cap and mid cap stocks in the coming weeks because it is standing on a very strong support.

 

Disclaimer – Wolf of Dalal Street is Kiran Sheth perspective and views on the market. The blog is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this website articles on financial markets you agree to make no trade relying in whole or in part on the comments of the writers. And also an advice please refer and consult your financial expert before investing. Happy Investing.