Bullish Breakout on Midcap Index

Aug 16, 2022

Brijesh Bhatia, Research analyst

As the markets get closer to its all-time high, the broader market has seen huge interest.

Midcaps are breaking out. My charts tell me that the bullish momentum in these stocks is very strong.

In this video, I'll show you why I'm bullish of these stocks and why you should be too.

Good morning subscribers. Welcome to the Fast Profits Daily. Myself, Brijesh Bhatia.

In this video, I'll be discussing the midcap index. If you remember, I have done a video of a few weeks back as well, where midcap index was indicating a strong recovery and we have seen midcap index coming back very, very strong after a nearly 25-30% fall between October 2021 to June 2022.

 

So if you look at the first chart over here on your screen, this is the midcap index chart. If I just look at the pattern over here right from 2021, where we made a high of 18,600 Nifty, most of the indices made highs around the same time.

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We had a phase of around 6-7 months of underperformance or falling in the market where stocks have been retracing on a larger scale. So if I just look at the break out over the here, it is the broadening wedge, which is the structure. The pattern has broken out on the midcap index chart. It indicates a strong momentum for the bulls over here.

 

If I look at the second chart over here, just adding the averages over here, there is a golden crossover. If you look at the blue line, it's the 50 and red is the 200 days average. We have seen a golden cross, again, a bullish sign after a break out. It indicates a huge structural move for midcap index.

 

Third chart, if I just look at it on your screen, it's the ratio of the midcap index over the Nifty 50. This is a weekly chart.

Look at the basing structure, which has formed at around 1.6-1.65, indicating that the basing is very, very strong after a step rise where midcap index had outperformed post pandemic.

The basing has been formed on a weekly scale right above the 200 weekly average of the ratio chart. It indicates that the midcap index is well placed for an outperformance over the Nifty in next few weeks or months probably.

I believe if I look at the time cycle of the midcap outperformance over the Nifty, it ranges for around 2.5-3 years. So we have just started from 2020 and I believe till mid-2023 midcap outperformance could continue over the Nifty.

You should definitely not miss this rally into the midcap space though there is a no straight line in the markets. But I believe the outperformance will continue into the midcap space. As an investor, you should not miss as the stocks which are outperforming in the midcap space or fundamentally, the stocks which are coming out very, very strong, out of their bad phases, will be interesting to watch.

So just to sum up midcap index is the one he should definitely look for investment stocks and you should not miss the rally for the next over, I think mid of 2023. This rally could continue in the midcap space.

Signing off, Brijesh Bhatia.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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