Reversal in Nifty IT ?
and other Big Base Breakouts with great Risk:Reward positionally
In this article, I will discuss 3 key sectors that technically look lucrative risk: and reward-wise.
These are:
Nifty IT
Nifty Pharma
Nifty FMCG
Let's dig deeper into each one of them.
Disclaimer: Nothing discussed in this article is a buy-sell recommendation.
Nifty IT:
weekly chart:
Price action: (The bigger the base, the bigger the move)
The index is still below its post-covid highs.
The price sits right around the 200-day SMA.
Massively underperformed the general market in this Bull run (evident from the MARS plot being below 0 and a weekly RS of ~50).
Currently forming a Big Base (126 weeks long. This is a Huge base).
That looks like a Cup and Handle.
It bounced off the lows of the handle this week.
Anticipation:
Certainly not one for the momentum players yet.
But this week’s price action of reversal and the fact that it is just above its 200/50 day SMA makes it a great candidate for timing your value buy.
A breakout of the CnH will open up a larger target of 50-60K in the next 6-12 months.
Slightly extended on the daily.
A pullback will offer better pivots from risk management.
Nonetheless, a 3-4R trade positionally can be on the cards.
Nifty Pharma:
The index broke out of a huge 10-year-long base last November.
It now forms the first secondary big base on its stage 2 uptrend, ~22% up from the primary base breakout.
Price broke out of this 15-week-long base yesterday.
Price is not extended at all, as the key MAs 10-20-50 are flat, closer to close price, and to each other as a launch-pad.
Anticipation: A momentum play
Intraday Pivots present us with a risk as low as 3%.
For positional play, SL below the base provides a risk of <10% which is text-book.
I anticipate at least a 20% upside in a 3-6 month time-period.
Nifty FMCG:
Another underperforming sector in this bull run (see MARS).
But now threatening to break out of a 21-week-long base.
Sector rotation and cyclicality are not an option but an eventuality.
So I wouldn’t bet against the sector to start outperforming soon.
In line with that expectation, we can see the MARS plot crossing above its 9-week ema and pointing upwards.
If the general markets start to consolidate, this could be a contrarian sectoral bet.
That’s all for today.
Trading at the end of the day is about placing a calculated BET (This is a fact. Disagree with me all you want but it is)
And therefore, as it goes with all bets it is inherently uncertain.
Therein lies the problem.
We tend to wish for certain outcomes out of a probabilistic game.
All we can make sure is that we acknowledge the certainty of the risk that is associated.
Accept that any bet can go wrong.
And that market is supreme.
Study the charts and use them to increase the probability of the trade, and time it for a better Risk: Reward.
If you want to learn how to leverage charts to aid you in your investing journey, Homma Private Access (HPA) will help you do that.
Details below:
Join the Sakatas Homma TA masterclass for beginners:
A complete course containing 8 Hourly sessions. Once a year.
To register for the next live masterclass, please fill out this form.
Watch the 1st session of the Autumn 2023 masterclass.
To access the full 8 sessions, contact us via WhatsApp @ 9481506784
Homma Private Access membership:
HPA is a subscription-based educational service (on WhatsApp). Benefits include:
Daily Market Breadth, Momentum, Sector Rotation, and Relative Strength Update.
Access to all my scanners including the BBB (buy before breakouts) scanner, and the Homma Khela Hobe 2.0 scanner.
Access to my proprietary Breadth-Momentum-Relative Strength & Sector Rotation dashboards.
Access to my Trading view indicators: Homma Khela Hobe, Buy before Breakouts (BBB), Homma Endgame, etc.
Access to live Telegram alerts to Homma Khela Hobe, Homma Pullback, and TGP scanners.
HPA Weekly: Hourly weekend deep dives and Q&A.
1-year access to The Technical Take premium.
Live alerts to high-risk-reward setups breaking out.
Live updates on my portfolio and the trading setup rationale.
Access to my high probability watchlist.
Yearly membership of 15000/- INR only.
UPI payment & WhatsApp @ 9481506784.
Yours
Sakatas Homma.