Stockology: After turbulent January, signs of recovery in large-cap stocks offer hope

Mid- and small-cap stocks may see further profit booking, demonstrating the market's selective resilience.

Stockology is a weekly column by futurologist Mahesh Gowande. He is the Founder and Director of Ayan Analytics, which has developed ZodiacAnalyst, a research software with time and price charting tools.

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Review of last week:
The day expected to be the most bullish last week turned out to be the most negative. TimeMap indicates time and potency, but not the direction of movement. Sector performance was strong, but interestingly, certain stocks were selectively punished. The banking sector is undergoing churn, while FMCG appears attractive for sticky, long-term investors. The new low has shaken the confidence of the bullish camp, and bears are preparing to hammer every weak stock. Mid- and small-cap companies have begun to decline, with the pace of the drop accelerating. Wealth erosion throughout January has been consistent, and 2025 seems to be no exception.

Technical Analysis:
As expected, a fresh new low was recorded, triggering fresh selling in many stocks. Wealth erosion could continue into the coming week. The weekly closing suggests selling on any rise and at current levels, with stops placed at 23,465 in the short-term TimeMap, and at 24,285 on a weekly basis. Breaking Friday's low will trigger fresh selling by system traders, targeting levels of 22,700 (a long-standing target), 22,430, and 22,240. The major uptrend will only begin above 24,870. A panic sell-off and forced liquidation seem imminent as the system cleanup approaches, suggesting we are nearing a critical turning point.

Traders should focus on straightforward and actionable steps. As noted, set clear and confirmed stops. If the stop feels too distant, wait for a bounce but do not adjust or move the stop. The most crucial skill for every trader is identifying a confirmed stop. There are countless ways to enter a trade and plenty of advice, news, and videos claiming to offer the best trades or multi-bagger tips.

However, the key to success lies in pinpointing a confirmed stop that has only a 30% chance of being triggered. Mastering this will put you among the top 3% of successful traders. Traders often disrupt natural sequences due to impatience, fear of missing out, or greed. Unfortunately, there are no YouTube videos dedicated to identifying standalone stop losses. The day traders learn to identify and set stop losses before entering a trade, success rates will improve by 30–40%.

TimeMap:
Be adaptable, like Google Maps. On your journey, you'll face surprises—some good, some bad. Remember, we are accountable for our choices. In 90% of cases, alternative routes and exits are available. Time begins to run out in only 10% of situations.

January's closing weeks have been turbulent, but signs of recovery in large-cap stocks offer hope. However, mid- and small-cap stocks may see further profit booking, demonstrating the market's selective resilience. The TimeMap will test the strength of the top 200 frontline stocks, revealing potential leaders and laggards. In every bullish rally, new participants emerge as stars, while former leaders fade into the background, highlighting the market's dynamic nature.

The positive influence of planetary positions from January 25th to 28th will start showing results during the last week of the month. Frontline sector leaders are expected to attract significant long-term investment flows. As mentioned last week, the bottoming-out process has begun in the short-term timeframe. After final cleanup, fear, and forced sell-offs, a new move is anticipated in the coming week.

In technical analysis, we don't aim to anticipate or act ahead of the market. Instead, savvy, profit-driven traders aim to follow the market, staying behind trends rather than trying to predict or lead them.

Daily Outlook:

January 27, 2025 (Monday, K.13, P. Shadha – Volatile Day):
The Tithi is often positive, leading to rising price movements. The second half of the Tithi (after 1:45 pm or post-lunch) tends to give better results for contrarian trades. Stocks with poor results will likely be punished.

January 28, 2025 (Tuesday, K.14, UttaraShadha – Volatile Day):
Divergent indicators will perform well. Quick participation is key. Traders should avoid overtrading, as most will feel tempted to take multiple trades.

January 29, 2025 (Wednesday, Amavasya, Shravan – Bullish):
Market sentiment remains cautious. Participants will aim to be more systematic. Volumes may be slightly lower, and price movements will be stable and directional. Use shorter timeframes (5 to 30 minutes) for day trading. Selective selling could yield significant profits.Note: Mercury conjunct Pluto is a wealth-destructive aspect, which may result in more natural disasters than market impacts.

January 30, 2025 (Thursday, S.1, Dhanistha – Bullish):
The Tithi is positive. Oversold reversal stocks that have given confirmation should be aggressively traded. This is the best day of the week for intraday profits. Momentum breakout indicators will deliver strong results. Aggressive participation is recommended.

January 31, 2025 (Friday, S.2, Shatataraka – Position Build-Up):
Counters showing potency and growth will be accumulated by strong hands. Position build-up is highly recommended. Leveraged positions can be taken once clarity and confirmation are established. Natural resource and large-cap companies are the best picks for today.

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