Stockology: As markets scale new highs, rebalancing portfolios is the most critical task

The week ahead seems optimistic for the markets, and a significant contributor could be the technology sector. Auto and PSU are coming a little negative and could hurt traders

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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.

We were surprised to see the aggression on January 12, especially in the tech sector. The price movement in the technology stocks must have trapped many off-guard. We are positive in the technology sector, and our portfolios are aligned with the index weights. Still, indeed, we are not overweight, which we or anybody else would have preferred to be.

Our expectation of a V-shape price movement in Nifty on January 11 was played over 48 hours. Markets dipped and recovered with substantial follow-up buying and short covering, resulting in recovery and scaling a lifetime high on Nifty.

Technicals - Nifty has risen to a new high, and from all the technical parameters, it is in a significant uptrend, so the question of shorts does not arise; the next question would be, is it wise to be long, and we always believed it is each to high own.

Also Read: Epack Durable IPO to hit Street on January 19: Check all details here

Investors uncomfortable with the current level and valuations of the markets can reduce or exit altogether; those who feel optimistic and bullish can remain long and hold 10-20 percent cash to look for switching opportunities; rebalancing is the most critical task, as a new high on indices also changes beta of the portfolio.

On the upside, 21,940 and 22,085 are the target levels, the downside range is 21,430-21,210, and the significant reversal weekly level is 20,810. Remain long in equity holding unless risk-reward is entirely off-balance. Reduce stocks not participating in the rally and showing no signs of turnaround.

Also Read: 82 smallcaps gain between 10-39% as record rally continues

TimeMap - It is interesting to note the importance of TimeMap; Polycab qualified on the fundamental merits, growth, profits, demand, and future. It had become the darling of the momentum signal and the traders. Algo programs are bullish and holding the stock, but TimeMap refrained from investing in Polycab.

Based on TimeMap data, the technology sector consistently showed positive trends and experienced accumulation over the past six months. This analysis was executed within our PriceBridge Direct MF, ensuring enough exposure to the technology sector.

In contrast, the banking sector is notably underweight, highlighting one of TimeMap's critical strengths in early identifying underperforming sectors. TimeMap is valuable in evaluating and ranking the effectiveness of both technical and algorithmic signals.

The above examples are for the 8-month to 30-month investment cycle.

Also Read: Nifty may be in last leg of rally | These 3 stocks likely to give 10-25% profit in short term

The week ahead seems optimistic for the markets, and a significant contributor could be the technology sector. Auto and PSU are coming a little negative and could hurt traders. Broadly, the euphoria would continue for a few more hours or days.

As per TimeMap, the real threat to markets could be around the 19th to 24th of January, not because of event of the century, but the planet aspect of Sun 0 Pluto, on 20th, Venus 90 Neptune on 19th - some global reason could hit the markets badly.

Also Read: Commodity markets set to focus on US retail sales, FOMC officials speeches next week

January 15, 2024: Monday: S.5: P.Bhadrapada: volatile day

Tithi gives the best results on Momentum indicators, and the movement is vast, and the reaction is equally fast. Wide zigzag price movement will do best for the mean reversion indicators, and traders can make much money. STBT (sell today, buy tomorrow) recommended.

January 16, 2024: Tuesday: S.6: U.Bhadrapada: Bad Day

Diversion or pattern failure of yesterday should be aggressively traded. Companies declaring bad results would get punished, while good results would get nominally rewarded. Bad day for the markets.

January 17, 2024: Wednesday: S.7: Revati: Auspicious day

Tithi 7 gives trended directional movement and is more often positive. Revati gives volatility. Inherently, the impact of Revati prompts an immediate response of panic, leading to heightened volatility and sharp price fluctuations, whether in a positive or negative direction. Stocks in the media, tech, and steel sectors will likely experience substantial trading volumes. A negative close would indicate a trend reversal.

Also Read: Market action: Five IPOs to open for subscription next week, four companies scheduled for listing

January 18, 2024: Thursday: S.8: Ashwini: Volatile day

Gap down cannot be ruled out. Tithi gives reversal or end of the exiting swing trend; the impact of the Tithi is on hourly signals, so mean reversion or best trade is oversold reversal works the best. Automobile and Cement companies do well.

January 19, 2024: Friday: S.9: Bharni: Best short sell day

Tithi in the first half gives bullish movement, and the second half gives bearish movement. Nakshatra Bharani is best for-profit booking; further reduction in exposure is highly recommended.