Mid-cap and small-cap stocks have been underperforming their large-cap counterparts as of late. However, it's important to remember when looking at an index that it's a basket of stocks, and therefore, looking at each of the components can unearth great opportunities. In this month's All Star Charts India (Premium) Members Only Conference Call, we spoke about the strength in the financial services, information technology, consumer goods and energy sectors, so this is a follow-up post looking at the mid-cap stocks, many of which are in these sectors, that we want to be buying.
Before we get into individual stocks, I want highlight the potentialfailed breakdown
that we're watching in the index itself. Last week, prices undercut the March lows as momentum diverged positively. If we can get back above 19,200, it would confirm a failed breakdown and likely be the catalyst to push this market to new all-time highs. Due to the strength we're seeing in the stocks discussed throughout this post, we think that is the higher-probability outcome, but we remain open minded and have defined our risk in each of the names we want to be buying in case we're wrong.
[I show investors how to analyze stock charts to determine profitable entry and exit points for trades in my Technical Analysis course on the Investopedia Academy.]
The first stock on our list is United Breweries Limited (UBL.BO), which is breaking out of a three-year base after an aggressive rally sparked by the failed breakdown in March. As long as prices are above 1,210 Indian rupees, we want to be aggressively long and looking to take profits near 1,550 rupees.
The next name I want to highlight is Pfizer Limited (PFIZER.BO) because, despite the strong downtrend in the NIFTY Pharma Index, this stock is making new all-time closing highs as it breaks out of a three-year base. Prices are now back at the intraday highs set in 2015 and may pause slightly to work off this bearish momentum divergence, but ultimately, we believe that prices are headed a lot higher. For risk management purposes, we want to be long only if the shares are above 2,600 rupees and taking profits near 3,260 rupees.
Premium members of All Star Charts, click here for a list of the remaining mid-cap stocks we want to be buying.
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