The calm before the storm: Three defence stocks on radar
Subscribe to enjoy similar stories. MUMBAI : Investors and traders are often looking for the next big opportunity, and in recent years, India's defence sector has been nothing short of a goldmine. The government's push towards self-reliance, massive budget allocations, and global defence orders have made defence stocks the market's darling.
But the second half of 2024 has taken an unexpected turn. With most defence stocks correcting by double digits since their 2024 highs, one question looms large: Have investors lost faith in the defence sector? Before we jump to conclusions, let us take a moment to breathe. Retracements are a natural part of any market cycle, and no stock ever rallies in a straight line.
Yes, many defence stocks have seen steep corrections, but let us not forget that most are still in positive territory for 2024. This dip could be a temporary pause before the next rally. In fact, a closer look at the charts reveals a pattern of consolidation that savvy investors might want to take advantage of.
Let’s dive in. While many market participants are nervous about the recent corrections, experienced traders know that retracements often present opportunities. A stock consolidating between key moving averages, particularly the 50 daily exponential moving average (DEMA) and the 200DEMA, is not something to be ignored.
We named this setup a moving average (MA) squeeze, indicating that a stock is in a low volatility phase, getting ready for its next big move. You might be familiar with the golden cross, a bullish signal when the 50DEMA crosses above the 200DEMA. However, an even more interesting setup arises when the stock price consolidates between these two averages—a sign that it’s potentially coiling up for a
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