top of page

Eight Figr League Newsletter-01

Writer's picture: raytraceventuresraytraceventures
Fig:1 NIFTY 500 Index on daily timeframe trading below 200-day moving average
Fig:1 NIFTY 500 Index on daily timeframe trading below 200-day moving average

Indian market continues to project bearish outlook. NIFTY 500 index has closed below 200 day moving average for 5 consecutive days now. This is the time to be cautious with long side trades or fresh investment. Index has created another head and shoulder pattern closing near 21800.

88.89% of Stocks in IT-software space were trading close to their 52-week high. Showing high relative strength in the sector as compared to indices and other sectors. Below is the list of top 20 industries and % of stocks which have been trading near 52-week high as per the last trading session. Your selection of stocks should be from top 3 industries which have held strongly near 52-week high in this bearish market.

Fig:2 Industry-wise % of stocks near 52-week high
Fig:2 Industry-wise % of stocks near 52-week high

As of Jan 10, 87.02% stocks declined against 12.98% stocks which advanced in the cash segment showing the overall weakened market breadth.

Fig:3 87.02% of stocks in the cash segment declined
Fig:3 87.02% of stocks in the cash segment declined

For momentum investing you need buying force into the market and when there is a buying force around then many stocks hold above key moving averages. Here, we are considering the momentum burst factor which you can get to know by looking at the stocks which advanced by more than 4.5% in a day and stocks holding above 20-, 50- & 200-day moving averages. As you can tell from the table in Fig:4 that stocks showing momentum burst characteristic in the previous week have been very low. Stocks below 20-, 50- and 200-day moving averages have been highest on Jan 10 which further confirms the bearish bias.

Fig:4 Stocks near key moving averages
Fig:4 Stocks near key moving averages

NIFTY IT and the broader market

NIFTY IT advanced by +3.44% in the last trading session due to strong Q3 earning results for FY25 declared by TCS management. India’s largest IT services firm, TCS, reported a 12% year-on-year rise in consolidated net profit for the December quarter, reaching Rs 12,380 crore, in line with market expectations. TCS’s revenue for the quarter stood at Rs 63,973 crore, marking a 5.6% YoY increase.

Fig:5 Relative strength comparison of NIFTY IT and NIFTY 500
Fig:5 Relative strength comparison of NIFTY IT and NIFTY 500

Below are some of the relatively stronger names in IT-software services industry which have shown good strength amid sell off in the broader market. HCL technologies, Infosys, Wipro and Persistent Systems are some technically strong names, they were in an uptrend. After TCS results they further bounced up from 50 day moving average. We can further expect them to continue to rally if the market sentiment improves else, they might consolidate or show some pull back. But these are the stocks you should keep on your watchlist if you are a momentum investor as such names lift off very easily when the demand force returns back to the market.

Fig:6 HCL Technologies on daily timeframe

Fig:7 Wipro on daily timeframe

Fig:8 Infosys on daily timeframe
Fig:8 Infosys on daily timeframe

Fig:9 Persistent Systems on daily time frame


US Stock Market Highlights


Dow Jones Industrial Average Index has been trading below 50 day moving average for last 15 days. US stock market is expected to follow footprints of Indian stock market hence, our stance on US stock market is bearish for now. We do not recommend trading or investing on the long side.

Fig:10 DJI on daily timeframe
Fig:10 DJI on daily timeframe

US 10-year bond yield is 4.76% currently, it will mostly likely touch 5%. The world has seen the US 10-year bond yield crossing the 5% mark during the 2008 financial crisis.

Fig:11 US 10-year bond yield


US created 256,000 new jobs in the month of Dec 2024 which was 91,000 more than expected indicating that hiring appears relatively unencumbered as employers followed through on their plans outlined in November. Markets reacted negatively to this news as now investors expect a longer pause from the Fed for the rate cuts. As a result, the 10-year yield shot up to nearly 4.8% and S&P 500 fell sharply by 1.5%.

Fig:12 S&P 500 index on daily timeframe
Fig:12 S&P 500 index on daily timeframe

Let's look at the big 7 technology companies


Nvidia has most likely created a double top, strong selling day on Jan 7 on high volume screams caution for long side traders and investors.

Fig:13 Nvidia Corp on daily timeframe
Fig:13 Nvidia Corp on daily timeframe

In Nov end Apple broke out from its 4-month long base and after topping on 26 Dec it fell for 4 consecutive days and then consolidated for 4 more days before creating new low. Now the price has fell again into the base which shows change in market structure and overall sentiment.

Fig:14 Apple on daily timeframe


Microsoft Corp. is in downtrend, as you can see it is clearly creating lower highs on daily time frame. 405-410 is a crucial support level.

Fig:15 Microsoft Corp. on daily timeframe


Alphabet Inc. seems to have created double top, break of trendline can push the price further down to test the support level of 178-183.

Fig:16 Alphabet Inc. on daily timeframe


Amazon has been showing signs of bearish divergence in the price. Upswings are losing the strength and rally has been sold confirming institutional selling in place.

Fig:17 Amazon on daily timeframe


Tesla Inc. is pulling back trying to find support on 50 day moving average.

Fig:18 Tesla Inc. on daily timeframe


Meta Platforms seems to be facing resistance at the previous price swing high, if the price tests 585 level and closes below, it will go into the bear's territory.

Fig:19 Meta Platforms on daily timeframe


This brings us to the closure of this week's newsletter. I hope you enjoyed reading it as much as I enjoyed writing it. To continue receiving it you can become the part of Eight Figr League and know the pulse of Indian and US stock markets, get daily updates, learn fundamental and technical analysis, connect with me over video call.


You can also connect with me over LinkedIn and X(Twitter). I'm a student for life, so don't hesitate to send over your views or sources to help me enlighten myself.   If you are a beginner and want to learn how I do what I do. The below series of blogs will help, to be read in chronological order:

Thank you for your time. Have a great week ahead in creating sustainable wealth!



160 views0 comments

Commentaires


bottom of page