Markets reward those investors who can see a theme before it becomes the consensus trade. It seems the Tourism and Hospitality space is at the beginning of that stage now.
The Nifty India Tourism Index and its major components like InterGlobe Aviation (IndiGo) and Indian Hotels are exhibiting a bullish reversal pattern from the 200-Week Exponential Moving Average (200-WEMA) Channel while many traders keep chasing momentum in sectors already at lifetime highs. This is a signal worth watching for medium and long-term investors.
Nifty India Tourism Index: The Theme Awakens
The Nifty India Tourism Index was under pressure for most of the last several months after correcting from its highs around 9,500. The pullback brought the index back into the long-term support zone created by the 200-WEMA Channel.
The 200-WEMA has always been a major trend-defining support in major bull markets. A lot of strong sectors will retrace into this zone, hit selling and then continue in the primary trend. That’s exactly what seems to be happening now.
The index recently tested the 200-WEMA Channel near the 7,200-7,400 zone and has turned bullish off those levels.
Technical Setup:
- The long-term trend is still up.
- Price has respected 200-WEMA support.
- MACD has turned up from deeply oversold territory.
- Positive momentum is on the rise after a period of consolidation.
This blend indicates the correction phase is over and the next leg of the trend could potentially be setting up.
As the index is potentially heading north, here are two stocks that investors can add to their watchlist.
IndiGo: Airline Leader Benefiting from the Channel
InterGlobe Aviation, which operates IndiGo Airlines, continues to be one of the strongest structural stories in Indian aviation.
The stock corrected sharply from its top above Rs.6,200 and then moved lower to the 200-WEMA Channel gradually.
Instead of falling apart, the stock has found support around the channel and is starting to rebound.
What sticks out on the chart is:
- Price is still above the 200-WEMA Channel.
- Strong bullish weekly candles coming off support.
- Bullish MACD crossover
- Momentum histogram goes positive.
This setup suggests the stock has completed a healthy correction in a larger secular uptrend. For medium term traders, this reversal increases the probability of a move back towards previous swing highs.
Indian Hotels: Breakout Adds To Confirmation
The stock not only respected the 200-WEMA Channel but also broke above a falling trendline that had been capping prices for several months.
The combination of:
- Long-term trend
- Breakout of trendline,
- Faster rally
- Positive MACD structure
forms a potential bullish chart structure.
The biggest trends tend to occur when a stock bounces off a long-term support level and breaks through a medium-term resistance level at the same time. Indian Hotels seems to be doing just that.
The breakout signals a shift to buyer-led action following a protracted period of consolidation.
How to Play This Theme?
Successful market participants tend to look for sectors that are coming off corrections instead of chasing stocks after a vertical rally.
That opportunity currently exists in the Tourism theme. IndiGo and Indian Hotels are displaying bullish reversal from the medium-term trend indicating the resumption of long-term trend.
For traders and investors looking beyond the next few weeks, the Tourism theme deserves a spot on the watchlist. The charts suggest that what looks like a simple bounce today may develop into the next important medium-to long-term opportunity. It may be a good idea to add these stocks to your watchlist.
Disclaimer:
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.
Brijesh Bhatia is an Independent Research Analyst and is engaged in offering research and recommendation services with SEBI RA Number – INH000022075. He has two decades of experience in India’s financial markets as a trader and technical analyst.
Disclosure: The writer and his dependents do not hold the stocks discussed here.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives and resources, and only after consulting such independent advisors if necessary.
