The Indian stock market has been in a correction phase since September. Despite this, a few mid-cap and small-cap stocks have managed to shine, proving to be strong and reliable picks for investors and traders.
Look at the trend: While the benchmark Nifty 50 index has declined by about 7% since scaling a record high in late September, JK Paper Ltd has outperformed with a 4.71% gain in that period, and Andhra Paper Ltd has held steady, showing no major drop despite the market correction.
View Full Image
The Nifty 50 seems to have found a potential bottom and could soon retest its recent high. This makes it an appropriate time to focus on stocks that stayed strong during the correction phase—such stocks often lead the way when the market bounces back.
Inverted head and shoulder: A bullish signal
The Nifty 50 has formed an inverted head-and-shoulder pattern, a classic bullish reversal signal. This indicates that the correction phase might be over and a fresh uptrend could start.
This bullish setup is reflected in many stocks. Among those, Profit Pulse has identified two paper stocks that look particularly strong. These stocks have previously outperformed the broader market and could be early movers in the next rally.
Also read | MobiKwik’s IPO: Is this the start of something bigger?
JK Paper
On the weekly chart, JK Paper broke out in July after consolidating for two years, moving from ₹440 per share to ₹640. However, it couldn’t hold those higher levels and retraced to its support zone.
At its current level, the stock has strong support from:
- A rising trendline, and
- A 78.6% retracement level at around ₹390 per share, measured from the swing low of ₹320 to the swing high of ₹638.
View Full Image
The daily chart’s correction from ₹638 per share to ₹390 created a falling trendline, which usually signals a bearish continuation.
However, the JK Paper stock showed resilience:
- It briefly dipped below its 200-day moving average (DMA) but quickly bounced back.
- At the current level, the stock has also formed an inverted head and shoulder pattern, which is a strong bullish reversal signal.
- Additionally, the 14-period relative strength index (RSI) is moving toward the bullish zone, adding further confidence to the stock’s potential upside.
View Full Image
This chart setup indicates a strong upward move could be coming. It also positions JK Paper as a promising candidate among paper stocks for medium-term gains.
For confirmation of the breakout from the inverted head and shoulder pattern, investors and traders should keep an eye on a move above ₹500 per share.
Also read | Three capital-efficient market outliers FIIs bought during the 2024 selloff
Andhra Paper
On the weekly chart, Andhra Paper found strong support in the ₹90-100 per share range, which earlier acted as a resistance zone. Once that resistance was crossed, the stock rallied from ₹100 per share to ₹130.
Currently, Andhra Paper’s share price is in a consolidation phase, forming a descending triangle pattern. At the same time, the 14-period RSI shows a bullish divergence, signalling a potential reversal and upward move.
View Full Image
On the daily chart, Andhra Paper shows strong bullish signals:
- It has formed a bullish reversal inverted head and shoulder pattern.
- Its share price is on the verge of a breakout from the falling trendline.
- After three months, the stock has exceeded its 200-day moving average (DMA).
- Its 14-period RSI is now trading firmly in the bullish zone.
View Full Image
Overall, paper stocks are gearing up for a strong performance.
As discussed earlier, the Nifty 50 has formed an intermediate bottom, and is expected to test its all-time high soon. During the recent market correction, paper stocks had already outperformed the Nifty 50.
Now, with the market showing clear signs of a bullish trend, it’s likely that paper stocks will lead the way.
Investors and traders should keep Andhra Paper and JK Paper on their radar. Both stocks look strong and could potentially move up in the coming days.
Also read | Three textile stocks breaking out on the charts
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.
Kiran Jani has over 15 years of experience as a trader and technical analyst in India’s financial markets. He has worked with Asit C Mehta, Kotak Commodities, and Axis Securities. Presently, he is head of the technical and derivative research desk at Jainam Broking Ltd.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However, clients of Jainam Broking may or may not own these securities.
