Stockology: Watch for divergence indicators in a volatile trading week

Sell more on the rise, and the breaking of 21,100 with the apparent target of 20,450 and 20,100 within 30 days

Stockology is a weekly column by futurologist Mahesh Gowande. He is the founder and director of Ayan Analytics which has developed ZodiacAnalyst. It is a research software, with time and price charting tools, and it is exclusively used along with technical support.

There were three working days in the last week, but Tuesday's (January 23) fall distorted many bullish charts. The following two days gave insight that there is a long way to go for the infra and PSU companies, as expected, and lastly, cement companies are finally showing a bullish pattern after decades, and there can be 50 percent or more gains in many of them. The intra-week movement was much in line with expectations, and there were no surprises.

Technicals - We have been bearish on the markets from a short-term perspective and needed confirmations of Nifty target 20,430, which was confirmed last week.

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Reducing exposure to small and mid-cap stocks is highly recommended; while the story is not over, it will take some time to consolidate and adjust to the new regimes. The energy sector, commodities, or natural resources, still holds a pretty good upside. The financial service sector is low risk and has much better upside returns in the coming few months; the next is chemical sector stocks.

Sell more on the rise, and the breaking of 21,100 with the apparent target of 20,450 and 20,100 within 30 days. Technical analysis is much more beyond resistance and support; technical is being with the smart money, trend following is to avoid momentum indicators; it is more of the Art of Lagging.

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Most traders experience losses, with approximately 97.5 percent consistently losing money. Trend-following systems often align with these losing trades. The true skill of an analyst lies in discerning the winners and aligning with them.

TimeMap - Interesting phase. The influence of time and human responses are so predictive. We have always believed that the timing of action or execution of investment ideas is critical, as it can improve the performance of the fund or portfolio. TimeMap can reduce the portfolio's risk profile, minimise beta, and enhance the alpha of the fund or portfolio of the investors.

The coming week will be volatile; the efficiency of the TimeMap is above 50 percent, which means the movement would be slightly above 3 percent. The bias is in favour of the sellers. Moon's 90-degree aspect with multiple planets affects decision-making; delay leads to frustration, and markets witness fear, uncertainty, and liquidation. A few stocks would get hammered; watch for the divergence indicators on the weekly charts.

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January 29, 2024: Monday: K.4: Purva: Volatile day
A slightly higher opening is expected. Tithi will generate many deceptive signals on the charts; the best is to avoid getting carried away and wait for the second confirmation. The energy sector would see a lot of positive activity. The positive is infra and power stocks will get some boost, due to Mars 120 Uranus aspects. STBT (sell today, buy tomorrow) is recommended.

January 30, 2024: Tuesday: K.4- 8.55/K.5: Uttara: Auspicious DayTithi 4, Tuesday combination can give significant volatility and momentum breakout indicators will provide the best profitable trades. Mean reversion trades post-lunchtime can be better for participation. STBT is recommended.

January 31, 2024: Wednesday: K.5-11.37: Hasta: Auspicious day
A flat to slightly higher opening of indices is expected. The market sentiment would be low & cautious, and most participants would delay their trades. On the most auspicious day of the week, investment is suggested: invest in ETF, SIP, or long-term position trades.

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February 01, 2024: Thursday: K.6: Chitra: bullish till 14
The gap-up opening is expected. There will be good aggressive follow-up buying in select counters, which will lift the market sentiment. Private banks and high beta counters will give good trading profits. STBT is highly recommended.

February 02, 2024: Friday: K.7: Swati: Trended Day
Tithi gives best directional trades, Nakshatra is good for investment, but in out opinion Selling will give more rewards, contrarian trade will give much better results.