11 Stocks to Watch: Analysts See Potential Rebound
Market Watchlist: Stocks Poised for Recovery
Nifty’s Ups and Downs
Last week saw the Nifty 50 index swing back and forth, leaving both bulls and bears a bit disappointed. While the 10-day Simple Moving Average (SMA) initially broke down, causing some concern about a major downward move, the 20-day SMA quickly stepped in to provide support, pushing the Nifty back up. The volatility is likely due to the VIX, a measure of market fear, hovering around the 17 level.
Small Caps Showing Strength
Small-cap stocks, in particular, are showing some exciting signs. Although they bounced back last week, there wasn’t much froth or indication of a bubble. However, things have changed. They’ve started outperforming even when the Nifty is falling. On May 22nd, for example, the Nifty dropped sharply, with 72% of its constituents falling below their 10-day SMA. But only about 25% of small caps followed suit. By the end of the week, 69.6% of small caps were trading above their 10-day SMA, compared to 50% of Nifty 50 stocks. The trend is even clearer looking at the 20-day SMA, with 84% of small caps above it compared to 70% of Nifty 50 stocks.
PSU Banks Ready to Rebound
The PSU Banking index has been experiencing some profit-taking this week but remains strong. It’s holding above the Supertrend, a technical indicator, and closed above a declining trendline resistance. The MACD histogram also suggests that the selling pressure is easing, pointing to a potential reversal.
Key banking stocks like State Bank of India, Bank of Baroda, Punjab National Bank, Union Bank, and Canara Bank are either breaking out of their bearish patterns or showing signs of improvement. Derivative data also supports this positive outlook, with a significant increase in long positions and a decrease in short positions in PSU Bank stocks.
IT Stocks Showing Bullish Signs
The IT index has been in a widening wedge pattern but recently bounced off its rising trendline support, signaling a potential reversal. While the week started weakly, buying picked up towards the end, and the weekly MACD crossed above the signal line, reinforcing the bullish outlook. Derivative data is also strong, with 90% of IT stocks showing a build-up in long positions.
Nifty Outlook: Positive Momentum
Friday’s rise found resistance at 24,950, but analysts remain optimistic. A morning star pattern on the daily chart, coupled with a parallel consolidation in hourly charts and repeated support at the 24,500 level, suggests further gains. The next target could be 25,235, followed by 25,460, with even 26,250 as a long-term objective. However, if the Nifty fails to break past 24,950, it could lead to a pullback, with a downside target at 24,755. A deeper correction is unlikely, but the 24,500 level would need to be breached to trigger a move towards 24,060.
About the Author
Anand James is the Chief Market Strategist at Geojit Investments.
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