Stocks around the globe have been making new highs as of late, rallying over the past several weeks and months.
Will it continue or are we due for some consolidation first?
Let’s take a look.
Here’s a daily view of the Nifty 500 which is approaching the top of its long-term range following a 13% rally over the last 10 weeks.
Momentum managed to get overbought, confirming the strength from buyers, but from a tactical perspective, the time to get aggressive on the long side was two months ago. Today, we’re seeing evidence that suggests a pause is ahead for many leading stocks and major indices.
Click on chart to enlarge view.
Here’s ICICI Bank hitting our first upside price objective at 478 and backing off as momentum diverges.
Titan Company Ltd. is failing to break out as upside momentum wanes, suggesting some further consolidation is needed.
Asian Paints Ltd. has been a great stock for us but is now rolling over after meeting our 1,835 target as momentum diverges.
Weaker stocks like Eicher Motors which have experienced sharp mean reversion during the last two months have met or exceeded our upside targets. Could they go higher in the near-term? Sure, but from a trading perspective, the reward/risk is not what it once was.
Finally, stocks like UPL Ltd. which have tried to break out and haven’t yet are indicating that they need more time to work through overhead supply.
We remain bullish Equities as an asset class, but tactically we think the reward/risk could potentially be better in the coming weeks after stocks work digest their recent gains and set up for their next move higher.
In the meantime, we’re watching for fresh breakouts and buyable dips in trending stocks to offer more attractive entries on the long side.
Thanks for reading and let us know if you have any questions!