A quick technical take on Nifty
NIFTY Daily Chart
- The current move has picked up speed.
- A Doji Candlestick. Lows at 13310. If we close below that it would be a first indication of reversal with a stop at 13435.
- A bigger trend reversal below 3 days low at 13150
- The red trendline break would confirm momentum shift to down.
- Till the time price does not give evidence of reversal got to ride but be alert.
India Vix is back to the Pre Covid zone.
- The Covid fear is finally out from Volatility Index.
- Till the time we do not cross 25 we could continue to see a less volatile environment.
Nifty50 Equal Weight – A Broad Rally Finally
- From the Lows of October Nifty us up 16% and Nifty Equal Weight is up 21%.
- Ever since January 2018 peak all rallies were very narrow.
- Since mid of 2018 this is the first time Nifty50 Equal Weight made a new high.
- A lot of breadth indicators are overbought. All Nifty stocks above 200 dma, 90% of stocks above 200 dma, Nifty50 Equal Weight outperforming Nifty, Nifty Next 50 finally near 2018 highs.
- A correction would be warranted but such Breadth Breakouts have a tendency to over-extend and the best way to do is ride till price reverses.
- Secondly in many such instances of Breadth Breakouts are indications of a long term trend starting in smallcaps,midcaps. Also stock specific action continues even with a sideways correction in the Index. ( Remember 2015-2016- Nifty 9000 to 8000 but Textiles, Chemicals and other sectors did really well.)
- Simply put – One needs to now go stock specific and sector specific. Keep hunting for interesting companies.
- We did a detailed post on how one needs to be stock specific last month. Do read it again even if you have read the post.
Do read this snippet .. ( Some of these beliefs have started being challenged – Smallcap Index up 10-12% , PSU up 30% , Cyclicals up 30%, Quality Companies going sideways.)
According to me these are the Top 3 Beliefs which may be challenged and can get broken.
- Smallcaps/Microcaps in the end lose money. Long Term Return is equivalent to LargeCaps. Do not buy Microcaps/Smallcaps.
- Quality Companies, Super Growth Cos can be bought at any Valuations. In the Long run they give Returns.
- PSU companies, Utilities, Cyclicals are wealth Destroyers and not to be touched forever.