How to Spot Outperformers in this Market

Apr 14, 2020

Apurva Sheth, Editor,Profit Hunter Pro

The Indian stock market has bounced back strongly. This is in line with the rally in global markets.

But is buying the index the best way to play the rally?

I believe it's better to identify the leaders of the market and bet on them instead.

And yes, there is a simple way to find such stocks. In today's video, I will show you how.

Using this simple indicator, I have identified the top performing sector in this market.

These stocks could lead the rally going ahead.

Hi, I'm Apurva Sheth and I welcome you to this latest edition of Fast Profits Daily.

Two weeks ago, I spoke about how to identify market bottoms. I showed you how to use the 200 day simple moving average to identify them. And since then global markets are up 10-20% and this irrespective of the fact that the coronavirus spreading faster than expected. So why did the markets rally?

The 200 day moving average can help you identify outperformers in the market as well in a 20 stocks from the CNX 500 basket, which were trading above their 200 day moving average.

Now here is the same list of stocks in an Excel sheet. So here we have the names of the stock, the closing price as on 30th of March and the 200 day simple moving average level on the same day.

Here I have the percentage difference between the closing price and 200 day simple moving average.

So these stocks are sorted based on the maximum difference, or the stock, which is far above and is listed in the top.

So here we have the Adani Green, which is up 32% from its 200 day simple moving average. Abbott India 30% from its 200-day simple moving average and so on.

So I said a list of about 20 stocks, which were trading above the 200 day moving average. So these are the strongest stocks in the market. So generally we say that one should by strength and sell weakness.

How to identify strength in the market now? This is one way to identify strength in the market. That is, you identify stocks which are trading above the 200 day moving average, and the further they are above the 200 day moving average that indicates that these are the best candidates for a long opportunity.

Now we go one level deeper with this data. So let's take out the other stocks now. And I did I notice that out of 20 stocks, eight stocks were from the Pharma universe. So let me mark them out for you. So Abbott India, Ipca Laboratories, Granules, Ajanta Pharma, Alchem, JB Chemical, Torrent Pharma and the last is Biocon.

So there were eight stocks out of 20 which were from the Pharma universe. Now this is a strong indication you have seen a group of stocks from the same sector in the high performers list.

Now, this is a very strong indication that pharma sector could be the outperformer in the next few days. And that's what I wrote in my note as well. And one needs to wait and watch how these pharma stocks perform and not only these, the other stocks from the same sector as well.

So what has happened between 30th March and until now? So here in this sheet, I have performance of the stocks which are there in the pharma sector, the nifty pharma index and their performance. So here we have the performance of nifty pharma index, which is up by 21%. And the rest of the pharma stocks which are there in the index. And these stocks are also up by a decent margin.

So here you can see that pharma stocks have been doing well over the last couple of days and chances are that they could do continue to do well, going forward as well. So one should keep an eye on them.

Now, apart from this one should also keep this in mind that pharma sector has been an underperformer sector and most of the pharma stocks are topped out in 2015 and they have been trending lower for the last 4 to 5 years.

So there is a rule in the market, the last rally's underperformers generally tend to do well in the next bull market, and the stocks and sectors which did well in the last bull market do not tend to outperform.

So pharma sector has been an underperformer for the last 4 to 5 years. So pharma sector from that possibility becomes a good candidate for leading the next bull market. Not only that, not only in terms of price action, but also if you look at it from the perspective that now healthcare will become a priority not only for individuals but also for Corporates and governments as well.

So we would likely see increased spending on healthcare and medicines. So both in terms of price action as well as in terms of fundamental changes and behavioural changes that will come once the Corona virus crisis is over, the pharma sector could be in the forefront for the next few months and even probably years.

So that's all from me for today. I hope you enjoyed watching this video. I hope this video will add value to your trading and investments. And in case if it does, then please share it with your friends and family. Like this video. Do subscribe to our YouTube channel and also, don't forget to sign up and join the telegram channel. Both I and Vijay post absolutely fantastic stuff around there, which is liked by our readers and members of the channel. So please don't miss it. Do sign up to telegram.

So that's all from me for today. I hope you enjoyed watching this video.

Thanks a lot.

I hope you found this video to be useful in your trading.

Let me know what you think in the comments.

Watch out for Vijay's video tomorrow.

Warm regards,

Apurva Sheth
Apurva Sheth
Analyst, Fast Profits Report
Equitymaster Agora Research Private Limited (Research Analyst)

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5 Responses to "How to Spot Outperformers in this Market"

Vinod Vaghela

Apr 17, 2020

Thanks

Like 

Abhik Kar

Apr 17, 2020

I am in learning process. Hope to enrich myself in market analysis and trading.

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nagesh

Apr 16, 2020

Good video and Apurva provides one of the best views in equity master

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SANKARAN VENKATARAMAN

Apr 14, 2020

V.NICE observation
S.Venkataraman 7259811161

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Karun

Apr 14, 2020

Pl share how to spot outperformer in the market.

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