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- Aug 26, 2022 - The Smallcap Index Break Out: Track Top Smallcaps Closely
The Smallcap Index Break Out: Track Top Smallcaps Closely
The roller-coaster expiry yesterday for the benchmark Nifty 50 saw a surprise brutal attack by bears in the last hour of trading.
But it the end, that's how volatility is on an expiry day.
While the benchmark index fell to end in the red, the Small Cap index went against the market momentum and ended with 0.5% gains.
Since the recovery phase from the lows of June 2022, the Small Cap index has rallied over 20%. I believe this is just the start of a new innings.
The Time-Cycle Breakout
The Small Cap index is witnessing a lower high - lower low structure since the start of 2022.
During the fall, it underperformed against the Nifty 50. It fell over 30% whereas Nifty 50 was down 18%.
The reason I say smallcaps are just starting a new innings is because I see the Fibonacci Time-Cycle breakout on the daily chart.
The trendline (black line) connecting the highs has a resistance at 9,500. The index managed to cross the level and then broke out from the trendline after 141 days.
141 is a Fibonacci number. That's what caught my eye and why I wrote this note.
The breakout re-tested and now, the index is heading northwards.
A minor hurdle lies ahead at 200 DEMA (Daily Exponential Moving Average) which is placed at 9,585.
Considering the previous high of 9,630 and the 200 DEMA at 9,585, I believe a close above these minor hurdles can take index back to the five-digit mark.
Investors should choose the best smallcap stocks and invest in them as soon as it closes above the resistance zone.
My colleague Richa Agarwal agrees with me. As per Richa, it's not a good idea to wait more to buy smallcaps.
Read her editorial on how to find the next smallcap multibagger.
She recently posted a note on her Telegram channel on 2 promising Small Cap stocks from semiconductor sector.
If you're interested in being part of my charting journey as I share how to create wealth from the profitable trade setups, join my telegram channel - Fast Profits Daily. You'll get access to the best trading ideas in the stock market.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...
Brijesh Bhatia Research Analyst and expert chartist, is the editor of Alpha Wave Profits. Fully committed to his craft, Brijesh has mastered the art of making money by trading using technical analysis. Brijesh has an MBA from ICFAI and 16 years of experience in India's financial markets. He began his career on Dalal Street as commodities dealer and it wasn't long before he developed his own unique trading system. Brijesh worked on his trading system until it could be expected to deliver 5 units of return for every unit of risk.
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