Why these two derivative stocks look promising on charts

Trend followers thrive by riding the wave of an established trend, betting that momentum will continue, while reversal traders look for opportunities to profit from the rare, but lucrative, moments when the trend flips. The excitement lies in identifying these inflection points—the sweet spot where analysis and timing meet to unlock potential profits. Whether you are jumping into a rising tide or betting on a dramatic turnaround. And right now, the market is offering both styles a chance to shine. Curious?

Let’s dive into some interesting chart setups that could potentially set the stage for your next big move.

Also Read: Three outperforming stocks to consider when the market reverses

Max Financial Services Ltd

Max Financial Services Ltd (MFSL) has been a strong performer over the past year, delivering impressive gains of 110% since March 2023. This type of strong upward momentum is precisely what trend-following traders look for—when a stock is in a clear bullish trend and continues to show strength despite market fluctuations.

After a brief correction in October 2024 (approximately 8% over 14 days), it appears that MFSL is showing signs of consolidation and preparing for its next leg up.

Here is the setup one to watch:

⦁ Bullish engulfing candlestick pattern

⦁ Bullish above 200-day SMA or simple moving average

⦁ Positive divergence on RSI or relative strength index

⦁ Reducing open interest: Perhaps most importantly for those focused on short covering, open interest has dropped by 5% over the past five days, even though the stock price has remained relatively flat. A reduction in open interest while prices stay steady or rise is a sign that traders are closing out their short positions, which can fuel further upward movement.

Given these technical indicators and the fact that the stock has already experienced significant upward movement over the past year, MFSL looks poised for another potential breakout. 

Also Read: In falling markets, consider this for capital preservation and growth

PVR Inox Ltd

PVR Inox Ltd, the entertainment giant that operates cinemas across India, has been an underperformer since September 2023, despite the release of several blockbuster movies. While this may seem concerning at first, the stock’s recent price action and upcoming catalysts paint an exciting picture for the future.

Here is why PVR Inox can be the potential opportunity on the chart.

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⦁ Support at key levels: Technically, PVR Inox is currently holding at its previous breakout levels and the 200-day moving average.

⦁ Bullish harami reversal candlestick

⦁ Positive divergence on RSI

⦁ Reducing open interest: Like MFSL, PVR Inox has seen open interest drop by 2% over the past five days.

This combination of technical support, short-covering behavior, and upcoming positive catalysts makes PVR Inox a potential contra-buy opportunity.

In conclusion, the broader market correction has created opportunities in stocks previously in a strong uptrend but have recently seen some selling pressure. Both Max Financial Services and PVR Inox show promising signs of a potential rebound based on technical analysis and derivative indicators.

For more such analysis, read Profit Pulse.

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 Jainam Broking Limited may or may not own these securities.

Kiran Jani has over 15 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face on the business channels as market experts and 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 Limited may or may not own these securities.