Stockology: Sentiment in the markets will be cautious; trades will be highly selective

Whether your positions are positive or negative, act quickly and decisively according to your trade plan, and keep emotions in check to make logical decisions.

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.

Read previous columns here

Review of last week

The bull rally has turned bearish in the short-term for the indices and many stocks. In the medium-term, the markets are entering a corrective phase, and for some stocks, there's a bearish signal. This marks the fifth consecutive negative week. In the fourth week, the indices managed to close in the positive, but the bounce is missing. The Nifty has declined 2,461 points, with a 365-point decline in the fourth week; the weekly positive gain was just 120 points.

As we've said,  under Swati nakshatra the markets offer excellent opportunities for quality investments. Most of the bluest-of-the-blue stocks witnessed over Rs 1 lakh crore's worth of liquidation by FIIs. Many Navaratna companies also saw a steep fall in valuation.

In other words, if your portfolio has not fallen more than the index in October, it may indicate that the portfolio’s quality needs to be checked, as FIIs do not own those stocks.

Technical
Markets have entered a bearish short-term phase, which could last a minimum of one to five months. In the medium-term, the first sign of weakness and reversal was triggered last week; the worrying part is the lack of  bounce. This is now providing an opportunity for trapped traders and investors to exit. Historically, from the current levels, markets should bounce to 24,850 and 25,100, allowing cornered traders to reduce positions and leveraged holdings.

Positions often get rolled over in the first two to three months, but the price fall has been very steep in just one month. Those holding positions may lose patience if the markets decline another 3 to 5 percent without a bounce. In that case, the MTM (market-to-market) losses in individual stocks could be more than 6 to 10 percent, potentially triggering a sell-off in November.

Psychologically, humans can tolerate a 20 or even 25 percent decline, but a draw down above 30 percent in leveraged positions tends to rattle even the best speculators and investors. The probability of the Nifty testing 22,675 is more than 70 percent, and the timeline will be covered under the TimeMap section.

The markets will be very cautious, and trading will be highly selective, more influenced by market news and flows, unlike a few days ago when confidence was high.

TimeMap

The sun’s transit in Swati provided an excellent opportunity to invest in blue-chip stocks. The sun will transit in the Vishakha nakshatra from November 6th to 19th. Ruled by Jupiter, this period surfaces qualities such as ambition, determination, strong opinions, and a forceful approach. These traits are beneficial when investments are profitable, but can be challenging when the holdings are net negative.

Key takeaway

Whether your positions are positive or negative, act quickly and decisively according to your trading plan, keep emotions in check, and  make logical decisions. Sector leaders, branded and innovative companies, and trend-setting firms are the best ones to invest in during this period. The clarity of the management regarding expansion and growth plans will become evident, and fundamental developments are seen on the balance sheet.

The sectors showing positivity in the coming two weeks are IT, banking, and FMCG. Auto, PSUs, and the midcap space are showing negativity, so be selective with such stocks.

As per ZodiacAnalyst, the market behaviour indicates that enthusiasm is low. “Buy the dips” is being replaced by “sell on rise,” and fresh money will be deployed slowly. The TimeMap is not indicating positivity; indeed, it shows  negative signs for many stocks. As mentioned above, some sectors are positive, but the midcap space will likely face heavy selling, and many largecaps will also experience selling pressure, with very few investment opportunities.

November 11, 2024: Monday: S.10: Shatataraka-9.40/P. Bhadrapada

A higher opening is expected. The tithi is good for action, and  the moon's position suggests that operators and deep-pocketed investors will be active in the markets. Metals and natural resources counters will be busy. STBT (sell today, buy tomorrow).

November 12, 2024: Tuesday: S.11: U. Bhadrapada: Bearish day

The tithi is auspicious, and the moon nakshatra is favourable for selling. This combination will likely result in a negative close in the markets; sentiments may suffer the most today. PSUs can be a contra buy.

November 13, 2024: Wednesday: S.12: Revati: Auspicious day

The tithi is favourable for contrarian trades. The moon makes contrarian action challenging, but those who succeed will benefit. BTST (buy today, sell tomorrow) is recommended, and STBT (sell today, buy tomorrow) in tech stocks.

November 14, 2024: Thursday: S.13: Ashwini: Bullish day

The tithi suggests volatility, with high-beta stocks attracting large institutional volumes. The nakshatra is favourable for initiating speculative positions. Intraday panic sell-offs should be seen as opportunities to add to existing positions. Buy technology and food companies.

November 15, 2024: Friday: S.14: Bharani: Bullish day
A significant recovery day for trapped positions; many stocks will experience price jumps, recovering from previous lows and providing an exit opportunity. Stocks failing to rise should be considered extremely weak and may face another round of declines.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.