Stock picks of the day: Use dips to create fresh long positions

Nifty rose almost 1000 points in last two sessions. The index soared more than 8 percent while Bank Nifty surged 14 percent from in last two sessions. This is the highest two days gain in Nifty and Bank Nifty after May 18, 2018.  After rising 5.32% on September 20, Nifty opened with a gap of 268 points in next session of September 23, 2019. This gap is between 11382 and 11471. This gap would act as a strong support zone in case of correction.

 

Nifty has retraced more than 61.8 percent of the entire down move from 12103 (all time high registered on June 3, 2019) to 10637 (August 23, 2019 Bottom). The Next retracement of 76.4 percent gives resistance at 11757 in Nifty. Out of 50 Nifty stocks, nine stocks have hit fresh 52-week highs. Nifty and Bank Nifty are just 4 percent away from their all time highs.

 

In this scenario, biggest question comes to the mind of the traders and investor is that whether to buy after sharp rise in short span of time. Though Nifty Smallcap Index has risen by 14 percent from August 2019 bottom, it is still down by 40 percent from its all time highs seen in January 2018. Midcap Index is placed 23 percent away from its January 2018 highs.

 

When major trend changes, first round of buying comes in largecaps and once trend sustains then midcap and smallcaps catch the trend. However, midcaps and smallcaps do have potential to give healthy returns in short span of time.