Stockology: Wait for the bounce to exit, markets may close in the positive by the end of the week

The last 3 days of the previous week clearly gave signs of short-term price correction which could be 4 to 7 percent and 6 to 8 months of time correction.

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

As expected, slowly and steadily, the markets have started showing signs of a short-term bearish trend. Frontline PSU and defence stocks have corrected and they could decline further. The need for a defensive investment strategy is clear, and a lot of new investment is flowing towards stable businesses like FMCG, pharma, and tech. Last Friday's single-candle fall is going to hurt investors big time. The way in which action has suddenly picked up in the microcap space is clearly an indication of trend reversal in the coming few days.

Technical

The last three days of the previous week clearly showed signs of a short-term price correction of 4 to 7 percent, and six to eight months of time correction. Most sector leaders have given a clear  sell signal. The euphoric defence sector has already seen a big correction of more than 15 percent in many scrips. PSUs, which have been in a speculative mode, have also emitted sell signals and a deep correction cannot be ruled out.

After reaching new highs, there was a lack of follow-up buying, and the markets dropped below the low of August 26th within three trading sessions. The recommended strategy now is to sell on any price increases, especially if previous stop levels have been broken.

The other technical levels mentioned last week remain the same. Now buying is expected in the 24,530-23,450 zone.

Time map
Currently, the sun is transiting nakshatra Purva which is ruled by Venus, and giving an opportunity to book profits and reduce exposure. In loss-making positions, current bounce levels can be used to book losses and stop further bleeding. Once the sun ingresses nakshatra Uttara, the fall will  pick up pace and that will extend losses, making things worse. So wherever selling has been triggered, ensure you get out early.

There are six solar weeks in a year when volatility expands or contracts suddenly, creating nice trading opportunities. Auto and defence are likely to fall further. Most metals will also fall. Cement stocks are showing signs of bottoming out. But the time map is positive for  banks and insurance stocks.

On 12th sun 90 Jupiter is an important aspect, and from the next day the sun will ingress Uttara, which means that divergence indicators will give the best results and a lot of money can be made in the next 30 days.

Jupiter is the planet that rules momentum, so falling  stocks will pick up pace, hence be careful with the stops. But there's no reason to panic as the markets will close in the positive in the current week, so wait for the bounce to exit.

September 09, 2024: Monday: S.6: Vishakha: bad day.

There could be a slightly higher opening and some stocks will bounce. Exiting or reducing exposure is recommended.

BTST (buy today, sell tomorrow) is indicated.

September 10, 2024: Tuesday: S.7: Anuradha: auspicious day.

Investment in established businesses  and long-term trades are advised. Stability and consistency will be key to decision-making, and the tithi will favour the bullish camp more. The nakshatra indicates positive vibes for natural resources and speciality chemicals. BTST in select steel and oil stocks.

September 11, 2024: Wednesday: S.8: Jyestha: best for short selling.

The best short-sell positions can be set up today. Book profits and reduce exposure in positions you're trapped in.

The metals — especially steel — sector will do very well, and high-beta sector leaders are the best stocks from an intra-day trading perspective. BTST-STBT (sell today, buy tomorrow), long-short market neutral baskets will give the best results. BTST in the cement sector.

September 12, 2024: Thursday: S.9: Moola: bullish volatile day.

The navami tithi in the first half gives us cause for optimism, while the second-half  is bearish. Auto, cement, and select engineering companies will see a bullish spike, but in the second-half external news will exert selling pressure. Think twice before a weekly rollover. Sun 90 Jupiter signals a big sell off in select index stocks. STBT is indicated.

September 13, 2024: Friday: S.10: P. Shadha: auspicious day to sell.

Profit-booking is highly recommended. Mean-reversion and contrarian trading strategies will deliver good results. Banks will be in the positive while pharma stocks will be negative today.

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.