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D-Street undergoing healthy bull market correction; 2 stocks with up to 18% return potential.
We believe the corrective phase over the last two months has made the markets healthier and created good opportunities for investors to accumulate quality stocks with a long-term horizon.
he Nifty50 flirted with its 200-DEMA and 200-DMA for the week ended Although, the index managed to gain for the week, it slipped nearly 3 percent or above 250 points in the month of March. How is the Nifty looking on technical charts.
Yes, after nearly 11 percent decline from the top, Nifty has been flirting around a cluster of 200-DMA and 200-DEMA, indicating a breather.
However, in line with our view, the Nifty has maintained the rhythm of not correcting over four weeks in a row, as buying demand emerged near key value area of 9950 being confluence of the 38.2 percent retracement of the entire previous major rally of the CY17 from 7894 to 11171 is at 9920 coinciding with support trend line of falling channel (drawn adjoining February – March lows of 10303-10142 projected from February high of 10537), placed around 9950.
We believe the index is undergoing a healthy bull market correction. Historically, within a bull market, corrections to the tune of 12-15% are considered as normal bull market corrections that provide long-term buying opportunities.
Price wise, the Nifty has already corrected 11 percent from its lifetime high, equivalent to demonetization correction (12%) levels in magnitude.
We believe the corrective phase over the last two months has made the markets healthier and created good opportunities for investors to accumulate quality stocks with a long-term horizon.
The larger degree price structure is still positive. We believe the Nifty has a key support base around 9800 - 9900 regions as the index absorbed major unprecedented events in the past while approaching 9900 levels.
Therefore, investors should use the current volatility in the markets to accumulate quality stocks in a staggered manner rather than waiting to catch the exact bottom.
At 9830 current correction would achieve equality with late 2016 correction (demonetisation bottom)
— Trend line connecting March and 2016 swing lows is placed around 9900 levels. Rising 52-week moving average placed at 9980 levels
— Thus, Nifty would gradually attempt a pullback towards mid-march 2018 peak of 10478 in coming months
— Trend line connecting March and 2016 swing lows is placed around 9900 levels. Rising 52-week moving average placed at 9980 levels
— Thus, Nifty would gradually attempt a pullback towards mid-march 2018 peak of 10478 in coming months
— The down move in February-March 2018 and corrective decline of nearly 11% since January 2018 peak has rendered the market deeply oversold and led the Nifty near close proximity of the ley value area around 9800-9900.
Going forward, we expect the index to enter into a base formation phase as the price wise correction is approaching maturity.
Therefore, we believe this presents a good opportunity for investors with a long-term horizon to start building a portfolio of quality stocks to ride the next phase of the larger uptrend
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