RSI can remain at elevated levels for long periods of time… Many a times when a stock reaches extreme overbought levels on RSI, it can do either of two things… First is go into sideways mode, consolidating within a range without giving up too much. Other is correct . When company in question is experiencing strong tailwinds and markets are convinced about the same, The former happens.
@hitusohi1 I don’t track titan.
Textile stocks are as you say showing signs of reversal from their downtrends. In these kind of cyclical sectors, charts usually indicate reversal much before any fundamental triggers are visible.
Signs of reversal will indicate only that a bottom formation has happened. Stocks can consolidate a long time even once bottoms are formed, before making big moves. Something similar is happening in some chemical sector stocks I see. But I am not too sure if and when the real big moves will happen or these will be dead cat bounces.
We have had a stellar rally ( and still continue to see) in small and midcaps in Indian markets and as of now there are no signs of letting up. But as you say, at some point of time in the future, inevitably this rally will take a pause , or reverse completely.
My aim usually is to make the most of such strong bull markets, so that when correction happens, giving up part of gains is not too painful. For that to happen, I have to ride the rally to the best of my ability in the strongest stocks in strongest sectors, with proper allocations.
While we must be watchful with respect to signs of correction, it’s often difficult to make a strategy beforehand as to how to deal with a correction in the future. Market corrections take different shapes and sizes. If these are routine bull market corrections, then it makes sense to be on the lookout for next sector building up momentum. But if its the actual real deal and big reversal on the cards, it makes sense to sit on the sidelines allow the dust to settle and get a clearer picture. So at the current juncture its difficult to formulate plans of a future correction.
Hitesh Sir, Which chemical stocks are you tracking. Could you please share?
As of now I am myself not too sure about the sector as a whole. So better not go into names at this juncture.
Dear sir, would you mind tell your views on a stock called Virat Crane. The stock has risen 24% this week with the highest volumes in the last 3-4 years, may very well have more volumes considering the remaining weeks on this month. The price is well above the 50 and 200 EMA on weekly chart, taken out the highs of the past few years on monthly chart, and is above 50 EMA on monthly chart. MACD and RSI are looking strong on weekly, and looks like the price may even go higher w.r.t MACD and RSI on monthly, but as it has run up a lot, I don’t want to get caught buying at a high price and wait for a couple of years to breakeven.
So I request your view on it, thank you in advance.
BSE small cap/NIfty ratio is now only below 2007 levels. It looks like we are in the fag end of bull run.
Drawing from your experience from previous cycles, do you think we are in last stage of this bull run?
Virat Crane has broken out of a 5 year high above 49 this week with a big bullish candle. Breakouts with big bullish candles usually indicate strength in the breakout. Volumes expectedly at the time of such breakouts are good. Overall a good technical set up.
But one thing that I have observed with most breakouts is that there is usually a retest of breakout zones and sometimes stock prices go below breakout zone also, as a sort of shakeout of weak hands. And then the rally resumes with vigour. In some rare instances we see stocks race past key multi year resistances and just keep going up, but these are rare.
In case of Virat Crane note the consolidation between 25-44, before the recent breakout. Usually stocks that have consolidated before a major breakouts provide better and more reliable set ups.
I don’t know much about the company, but if I were you, I would try to dig in details about the company and try to get a thesis of why I am investing.
In the current markets, I see a lot of set ups similar to Virat Crane, or some other set ups where picture is equally good. And in those names its much easier to do detailed research due to much more availability of information, from AR, concalls, presentations, scuttlebutt etc.
I see a lot of views about concerns related to small cap and midcap rally. People try to come out with complicated formulae to put up a hypothesis that these indices are over stretched and ripe for a correction.
Well, they might correct, or they may not, but I am not in the camp of forecasting stuff. I try to follow the trend and make the most of it. I focus on the stocks that I hold, and keep looking out for any signs of trouble.
A famous quote attributed to Sir John Templeton is very apt to summarise current situation in the market, and more so in small and midcap space. “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria .” To me there seems to be a lot of skepticism and some optimism. In next few weeks and months, who knows, euphoria could follow.
As investors we need to understand how to benefit from bull markets and make the most of them. The final euphoric phase of parabolic moves often provides very good opportunities of wealth creation. More so if you are into the sectors in fancy and the preferred stocks in those sectors. If you can ride them successfully a lot of wealth can be created. As investors our focus should be to learn how to ride these bull markets rather than keep worrying about things in the future.
It’s a well known fact that strong bull markets are followed by bear markets. But we cannot keep living in the fear of a bear market and keep sitting on the sidelines in the face of strong rallies. I have learnt a long time ago, that “If you can’t beat them, join them.” We are having a very strong small and midcap bull market and its visible since last few weeks too. We had nifty in a consolidation/corrective mode, but the small and midcaps kept rallying hard.
Now this week Nifty also seems to have started showing strength and has closed strong for the week above the important resistance of 19600.
one such set up is in IOL chemicals
Hitesh Ji, on my laptop sits a file: Hitesh - A Practitioner’s Manual. It contains many of your posts I revisit. I have learnt from many sources like all of us seekers but it has all been refined, deepened and nuanced here, in this long running, real time market laboratory you have mounted. Many Thanks. Respect. Gratitude. In my stock market journey, the best thing that happened to me is VP. Grateful to all the Teachers here.
Hi @hitesh2710 Bhai,
I do understand your point about making the most by riding the bull market. It is hard to do for an investor with fundamental investing mindset but still something with high money making potential.
But I have to disagree on the point that their is more pessimism than optimism in the market and we are not in the tail end of the spectrum of bull market end.
I would rather say that the investors on valuepickr are more informed compared to normal investors and this have higher likelihood of being pessimistic in euphoric conditions!!
Also, another point can be oct 2021 is fresh in everyone’s mind, their has been not much action in big stocks for past 2 years compared to smallcaps which almost halved and then again doubled, this the pessimism
Putting up Nifty small cap chart. It’s said that a picture is worth a thousand words.
Just to put in a few numbers. Oct 2021 high was 11876, Jan 2022 high at 12047.(both marked by horizontal lines on chart ) Current levels at 12800. Two important resistances of Oct 2021 and Jan 2022 were crossed in August 2023, so nearly a 2 year consolidation taken out recently.
Since crossing these above mentioned resistances, we have had a stellar rally and it has gone up nearly 7% from breakout level of 12k. Many a times once these multi year resistances are crossed, stocks and indices can go up well beyond the breakout levels, and then there can be a pause, and most commony a retest. From wherever and whenever a correction begins, the key levels to watch would be levels of 12000 (plus or minus 2-5% just to make allowance for whipsaws)
If we put Fibonacci levels to the fall from 12k (top in Jan 2022) to 8 k (bottom in April 2023) in CNX small cap index we get 161.8% levels at 14100, which could be a target. Now this target will not be achieved in a straight line. We might have correction at some point of time, maybe a retest of breakout zones mentioned above and then again a rally towards the Fibonacci target of 14k. This is just a hypothetical scenario based on technical analysis. It may or may not happen…
Coming to the psychological aspect of markets at this current juncture, the most common sentiment I see is skepticism and maybe some optimism. ( Pessimism is a thing of the past) Most of the investors I interact with are questioning the recent rally in the Nifty, and its subsegments like small and midcaps. To me, Euphoria seems to be some distance away. We have seen such euphoria (in the past) at the fag end of rally in 2007, and even in 2017.
Everyone is entitled to have their own views with respect to the markets. As of now above are my views. I can change them as soon as facts/charts change and give indications to the contrary. For me, as long as my techno funda strategy keeps working, I would not worry too much. But as soon as I see a lot of bullish patterns stop playing out and fail, I would be on alert mode for exits.
Cool, it’s great to get some views from veteran’s like you. I consider myself pretty weak from technical analysis pov, and am looking at the market just from the pov I am strong with that is fundamentals.
In a bull market, the technical analysis can prove to be really helpful, and as you said, it’s really hard to call the top of a bull market. It might as well reach 14k, but the valuations right now are already stretched.
Even at time of October 2021, there were a few sectors which had undemanding valuations, like PSU banks, PSUs in general had moderate valuations and sometimes ridiculously low like pfc/rec!! Small NBFCs also had undemanding valuations.
At present, the only sector I see with low valuations would be paper sector, which has also run up by 30 percent in past few weeks!!
Even sectors like chemical and pharma have started going up without much fundamental improvements!! The market has started pricing in improved outlook.
So since from fundamentals side, i don’t see any stock or sector with bearish tone, or decent valuations, I think the situation is getting out of hand.
That said, I have also observed that once a top is reached we can see some zig zag movements before market eventually falls, so if someone just rides to the top and gives away 5-10 percent gains before eventually liquidating, he might do much better than someone who liquauidated at first signs of overvaluation and eventually losing on the next 50-80 percent of gains!!
Hi Hitesh bhai,
How to differentiate in charts between trend reversal and dead cat bounce ? Thanks
Hi hitesh sir thanks for sharing your knowledge 
, I want to know your point of view on companies like praveg,brand concept, ice make refrigeration and focus Lighting.
I don’t follow any of the stocks you mentioned. But looking at the current market scenario, if one is investing in small and micro cap space, there should be very high conviction if one considers entering at these levels.
think you need to read a few books on technical analysis to get a grip on these patterns. And the other query on my portfolio thread regarding dead cat bounce and actual reversal.
I would suggest following books
1.How to make money in stocks by WIlliam O neil.
2. Secrets to profiting in bull and bear markets - Stan Weinstein… Stage investing book.
3. Minervini books.
4. Technical analysis of stock trends by Edward and Macgee.
Once these books are read, basic concepts will be clear and you will have a better understanding of these patterns and trends.
Sir all 4 company are guiding for 30+ % of growth for next 3 year if possible please make a look on them thanks
