Markets
Three outperforming stocks to consider when the market reverses
Summary
- In a turbulent market, identifying resilient stocks with the potential to outperform becomes crucial. While the broader market has faced pressure, three stocks show strong bullish setups that could position them for significant gains if a recovery takes hold. Read on to know more.
The stock market has faced mounting pressure recently, with foreign institutional investors (FIIs) stepping up their selling since the start of October. This aggressive sell-off has triggered a sharp retreat in major indices like the Nifty50, which has now fallen over 10% from its all-time high of 26,277.
The rapid decline has many investors asking: is this a market peak, or merely a short-term correction?
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Before diving into stocks poised to outperform in a market recovery, let's examine the broader Nifty50 index and its technical outlook.
The Nifty50 has slipped over 10% from its all-time highs, bringing it to a retest of its long-term support at the 200-Day Exponential Moving Average (200DEMA) Channel—formed using the average of high and low prices. Historically, this channel has served as a strong demand zone, presenting traders with a potential buying opportunity during market pullbacks.
In technical analysis, retracements and dips are typical within a healthy trend, and the coming days will be crucial in determining whether the broader market can reclaim its bullish momentum.
Against this backdrop, let’s turn to specific stocks that show strong potential to outperform, particularly if the market reverses its current downtrend.
1. Coforge
Coforge, a prominent IT services company, has consistently demonstrated solid performance, driven by robust demand in digital transformation and cloud services.
On the Point and Figure (P&F) Ratio Chart, Coforge’s stock has broken decisively above previous resistance levels, signalling a strong outperformance relative to the Nifty500 index. This breakout suggests that Coforge could maintain its positive relative strength, especially if the market begins to rebound.
Notably, on the 1% X 3 P&F chart, Coforge has broken out of a classic "Cup and Handle" formation, a bullish setup in technical analysis. This pattern typically features a rounded "cup" base, followed by a brief consolidation phase—the "handle"—before a breakout to the upside.
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The recent breakout has already successfully retested its level, reinforcing the likelihood of further gains. Together, this breakout and bullish pattern position Coforge as a strong candidate to outperform the broader market in the coming weeks.
2. Eris Life Sciences
Eris Life Sciences, a fast-growing player in the pharmaceutical sector, boasts a strong portfolio of branded generics and over-the-counter products. The company has been steadily expanding its market share, well-positioned to capitalize on the increasing demand for healthcare and wellness products, particularly in emerging markets.
On the 1% X 3 Point and Figure (P&F) Ratio Chart, Eris exhibits a bullish "5-Column Triangle" pattern, which typically forms after a robust rally and represents a consolidation phase before a potential move higher. The breakout from this pattern indicates the possible continuation of Eris’s bullish trend, suggesting that it could outperform the Nifty500 as the market stabilizes.
Recently, on the Daily 1% X 3 P&F chart, Eris broke out from a prolonged consolidation phase, lifting its price from ₹950 to above ₹1,400. This breakout ends the consolidation period, signalling a potential fresh rally.
As the ratio chart consolidates in a triangle pattern, it signifies a breather after the initial rally, setting the stage for another upward move once the breakout occurs.
Adding to the bullish setup, the breakout aligns above the D-Smart Line, a technical indicator that tracks relative strength trends. This alignment reinforces the case for further gains, positioning Eris Life Sciences as a strong contender to lead in a market recovery.
3. Indian Hotels
Indian Hotels, the Tata Group's flagship hospitality company, stands as one of India's largest and most established players in the industry. With a diverse portfolio of luxury hotels and resorts, the company is well-positioned to capitalize on the post-pandemic recovery in tourism and travel. As consumer spending rebounds and travel demand surges, Indian Hotels is set to experience sustained growth in earnings.
On the Daily 0.25% X 3 P&F Ratio chart, Indian Hotels has recently broken through multiple resistance levels, with its relative strength now at an all-time high compared to the Nifty500 index. This signals a strong potential for continued outperformance in the coming months, especially if the market reverses.
On the 1% X 3 Daily P&F chart, the stock has cleared significant resistance areas after breaking out of multiple consolidation zones, marking a robust bullish trend. The D-Smart Line, a key indicator of relative strength, is also trending upward, further reinforcing the likelihood of continued gains.
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As the hospitality sector bounces back, Indian Hotels is well-positioned to benefit from rising demand in travel and leisure. This momentum makes it an attractive option for potential strong returns, especially in a recovering market.
Finding winners in a market reversal
Despite broader market headwinds, certain stocks continue to show resilience and strong bullish potential. Coforge, Eris Life Sciences, and Indian Hotels stand out as promising candidates for outperformance.
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If the market reverses and begins to recover, these stocks could be well-positioned to lead the rebound, offering investors the potential for significant returns even in a volatile environment.
Disclaimer: This article is intended solely to share interesting charts, data points, and thought-provoking insights. It is NOT an investment recommendation. If you are considering an investment, please consult your financial advisor. This content is strictly for educational purposes.
About the author: Brijesh Bhatia has over 18 years of experience in India’s financial markets as a trader and technical analyst, with experience at UTI, Asit C Mehta, and Edelweiss Securities. He is currently an analyst at Definedge.
Disclosure: The author and his dependents do not hold the stocks discussed here, though Definedge clients may hold these securities.
