Weekly analysis : MID-CAPS OUTPERFORM; CONVERGENCE SETS IN - 24/01/2020

MID-CAPS OUTPERFORM; CONVERGENCE SETS IN - 24/01/2020.

 

MID-CAPS CONTINUE TO SHINE.

 

Last two and half years has seen the Frontline Indices outperform the Mid-Cap Indices by a huge margin. The divergence between both the indices became too glaring and every attempt to rally by the Mid-Cap indices was thwarted by the Bears. This time, finally the breakout in Mid-Cap Index has sustained and the out-performance is clearly visible. Last four weeks has seen the Nifty stay at the same level whereas the Mid-Cap100 Index has gone up by more than 7%. This out-performance is also seen in this week’s performance as Nifty was down by around 1% this week whereas the Mid-Cap 100 index was up around 1.5%. The convergence between both the indices has set in and it is likely to continue in the near future. Hence the focus should be on selection of good Mid-Cap and Small-Cap stocks for strong out-performance.

 


MID-CAPS OUTPERFORM; CONVERGENCE SETS IN - 24/01/2020.

 

MID-CAPS CONTINUE TO SHINE.

 

Last two and half years has seen the Frontline Indices outperform the Mid-Cap Indices by a huge margin. The divergence between both the indices became too glaring and every attempt to rally by the Mid-Cap indices was thwarted by the Bears. This time, finally the breakout in Mid-Cap Index has sustained and the out-performance is clearly visible. Last four weeks has seen the Nifty stay at the same level whereas the Mid-Cap100 Index has gone up by more than 7%. This out-performance is also seen in this week’s performance as Nifty was down by around 1% this week whereas the Mid-Cap 100 index was up around 1.5%. The convergence between both the indices has set in and it is likely to continue in the near future. Hence the focus should be on selection of good Mid-Cap and Small-Cap stocks for strong out-performance.

 

TECHNICALLY SPEAKING.

                                                                                  

Sensex opened the week at 42263, made a high of 42273, low of 41059 and closed the week at 41613. Thus it closed the week with a loss of 332 points. At the same time the Nifty opened the week at 12430, made a high of 12430, low of 12087 and closed the week at 12248. Thus the Nifty closed the week with a loss of 104 points.

 

On the daily charts, both the indices have formed a Real White body candle which comes on the back of Bullish Harami and hence acts as a confirmation for Bullish Reversal.  It can also be called Three Inside Up. On the weekly charts, both the indices have formed an Opening Black body Marubuzo with a long lower shadow. The pattern has bearish connotations, but the long lower shadow indicates buying at lower levels. Thus daily candlestick pattern suggests Bullish bias in the near term.

 

Last two weeks has seen the Nifty getting blocked by a Rising Trendline (12393) obtained by joining two previous tops over last two years. For Nifty it is acting as an immediate Resistance whereas Sensex is above the concerned Trendline.

 

Once the Nifty closes above the Rising Trendline, both the indices will head towards their Bullish Cup & Handle target which is at Sensex 42895 and Nifty 12751. Failure point will be a close below Sensex 38718 and Nifty 11490. Higher term Sensex target remains at 44700 and Nifty at 13500.

                                 

On the down side, strong Support is seen at Bullish Gap between Sensex 41175-40866 and Nifty 12132-12044, which acted as strong Support this week. A break of this Gap support will lead the indices towards a more critical Bullish Gap Support between Sensex 40490-40466 and Nifty 11934-11923. It has been tested successfully and it has provided strong Support. A break of this more critical Support will put the higher bottom (Sensex 40476 and Nifty 11929) in jeopardy and can result in a Trend Reversal.

 

This week, both the indices tested and closed above both the short term average of 20dma (Sensex – 41457 and Nifty – 12216) as well as the medium term average of 50dma (Sensex – 41116 and Nifty – 12119). Both the indices continue to remain above the long term average of 200dma (Sensex – 39191 and Nifty – 11644). Thus the Trend in the short term, medium term as well as long term Timeframe continues to be Bullish.

 

MACD is positive but in Sell mode whereas Price ROC is positive and hence in Buy mode. RSI (53) suggests Bullish momentum. Stochastic Oscillator %K (49) is above %D and hence is in Buy mode. ADX (15) suggests consolidation in an Uptrend. Directional Indicators are in Sell mode as +DI is below –DI. MFI (54) suggests Positive Money Flow. OBV continues in Buy mode. Thus majority of Oscillators are suggesting a Bullish bias.

 

Options data for January series indicate highest Call Open Interest at 12500 and highest Put build-up is at the strike of 12000. Thus Options data suggests a trading range with Resistance at 12500 and Support at 12000.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

11929

12023

12132

12248

12374

12484

12585

Sensex

40476

40866

41184

41613

41994

42428

42850

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Siemens

1624

1597

1667

1713

Buy ICICIPru

519

509

535

553

Buy Ujjivan

362

355

373

385

Buy ICICISec

472

462

489

509

Buy Wockhardt

299

293

310

323

 

WATCH OUT FOR:

 

ICICI Sec Rounding Bottom
 

 

 

 

 

 

 

 

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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