Sanjan91

CAN SMALL CAPS RECOVER FROM THE RECENT FALL? A GO-LONG IDEA.

Long
NSE:CNXSMALLCAP   NIFTY SMLCAP 100
Small caps 100 index has fallen nearly 11% reaching a decisive point in its fall. The price is currently resting on or near the daily timeframe's uptrend line (support).

The RSI is also at 30.14, which indicates a over sold signal and we may see a bounce very soon. The potential reversal zone formed by ABCD pattern's 1.618 and 2 fib extension acts as a demand zone for the small caps 100 index.

Here are the 3 scenarios that could develop,

1) The index may take support from the trendline and go up. Sustaining this trendline could take it to, point B and maybe further until point D. This could shape up into a bearish shark pattern.
2) The index may break the trendline and consolidate in the demand zone . Breaking the the demand zone and passing the pullback test would trigger a massive downfall up to 8600.
3) The index may break the trendline and take support from the demand zone and rise again above the trendline. The point B would be the profit booking point for longs.

Summary:
Check the price action for some time, if the trendline breaks then wait for it to consolidate in the demand zone and rise or fall eventually. If it sustains above the trendline, you can expect the index to rise 6-12%.

The main levels for profit booking are 10300 and 10800. Strict stoploss at 9660.

As the pattern develops, we can analyze the index back again for any change in levels.

Thank you.

This is not invest advice, please consult your financial advisor before investing.


Trade active: Took support on the trendline as expected. Let us see how far it goes.
Many of the small caps rose very well from their supports as well. :)
Trade active: Almost near the 10300 mark! Congrats if you had bought small-cap stocks on support :)
Trade active: After a pullback, it is rising above 10300. We can see some momentum in small-cap stocks in the upcoming days.
Trade closed: target reached: Target reached. Congrats.

Comments