Markets
3 stocks to avoid in the market reversal
Summary
- Here are the three stocks that have made it to the ‘avoid’ list, as they fail to show the strength needed to capitalise on the broader market’s recovery
In stock trading, technical analysis is the compass that guides traders toward profitable decisions. However, with a dizzying array of charting techniques and timeframes, many traders find themselves lost in a maze of options.
From the oldest and familiar candlestick charts to the more intricate but noiseless Point and Figure (P&F), Renko, Heikin Ashi, and Line Break charts, each method promises to reveal hidden trends—yet often, it feels like trying to read the stock market through a foggy lens.
The challenge is real. With so many tools to choose from, how can traders confidently trade through the stormy seas of market volatility and identify the trends that truly matter?
While traditional charting methods provide essential insights into market behaviour, we ran the All-Chart Matrix scanner by Definedge, which scans stocks across multiple timeframes and chart types.
The All-Chart Matrix scanner assigns each stock a trend score, ranking them from bullish to bearish. Stocks with the highest trend score are considered the most promising, while those with the lowest score indicate stocks that traders should avoid in rising markets.
The Nifty50 has recently reversed from levels of 23,300 to 24,500, igniting investor optimism as fear recedes from the market. The All-Chart Matrix scanner, which runs across multiple timeframes and chart types, allows traders to identify the best opportunities and where to avoid potential losses.
In this scenario, traders who have done their homework will be well-positioned to take advantage of rising trends and steer clear of stocks with weakening trends.
Stock Insights: Nifty200 and Selected Parameters
We expanded the analysis beyond the Nifty50 index to better gauge market trends and ran the All-Chart Matrix scanner on the Nifty200. This broader analysis helps identify emerging trends in a wider array of stocks.
Based on the results, the following three stocks were identified as having the lowest trend scores, indicating potential stocks to avoid in the current market environment:
Escorts India
Hero Moto Corp
ICICI Pru Life
Here are the ratio chart of the above stocks against Nifty200:
Escorts India
Escorts India has built a reputation for its expertise in sectors like automotive, agriculture, and construction equipment. The company is primarily known for manufacturing and distributing high-quality tractors and agricultural machinery that have become integral to Indian farming.
Escorts/Nifty200 Ratio Chart
Heromoto Corp
Hero MotoCorp is one of the largest and most prominent motorcycle manufacturers in the world, based in India. Established in 1984, the company is known for producing reliable, fuel-efficient, and affordable two-wheelers.
ICICI Prudential Life Insurance
ICICI Prudential Life Insurance, a leading life insurance company in India, was established in 2000 as a joint venture between ICICI Bank and Prudential Corporation Holdings. The company offers a wide range of life insurance products, including term plans, health insurance, wealth creation, retirement, and child plans, designed to cater to the diverse financial needs of individuals and families.
ICICIPruli/Nifty200 Ratio Chart
The three stocks mentioned—Escorts, Hero MotoCorp, and ICICI Pru Life—are clearly underperforming compared to the Nifty200. This underperformance indicates that these stocks are lagging in the current market reversal and are not participating in the upward momentum that many others are experiencing.
Consequently, these stocks have made it onto the "avoid" list, as they fail to show the strength needed to capitalise on the broader market’s recovery.
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Definedge may or may not own these securities.
Brijesh Bhatia has over 18 years of experience in India's financial markets as a trader and technical analyst. He has worked with the likes of UTI, Asit C Mehta, and Edelweiss Securities. Presently he is an analyst at Definedge.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However clients of Definedge may or may not own these securities.
