Weekly Market Recap
In line with my expectation, market posted yet another strong week in which major indices continued to rally towards its previous high. NIFTY fell more than 40% in March is only 10% down from its all-time high of 12400 which is quite surprising and marvel. I believe, this is the fastest and steepest recovery we have witnessed in the history of the stock market which has truly mesmerized the whole community of traders and investors.
In the week gone by the benchmark SENSEX posted a solid gain of 1108 points, or 3% to settle at 38120, similarly, NIFTY surged 292 points, or 2.68% to close at 11194.
Current Outlook
Technology has been the clear-cut winner and biggest gainer since March low and continued to lead the market this week too. However, RELIANCE is the unimpeachable standalone conquistador and biggest contributor in index who has gained 140% since March low and the story doesn’t seem to be over yet. The angle of acceleration is getting steeper day by day. Its is difficult to predict how far it can go, but history has no instance where this kind of precipitous move are sustainable, in fact such moves are quite vulnerable for deep pullback and pernicious in nature. However, given the propensity and exceptionally strong momentum and remarkable interest from institutions, no target is too big to achieve.
Last week, given the technical configuration, I suggested to go long on NIFTY and NIFTY based ETF which precisely pan out as expected. In addition, I also wrote, if financials tend to support the market, we may see a level of 11600 on NIFTY sooner than later. This week financials did well except for one day fall on Friday, though this fall could be a serious problem as selling was being witnessed among all the major stocks, consequently that can preclude the NIFTY to advance further. Therefore, we should be alert while keeping long position in NIFTY. Nevertheless, I think, stock specific strategy would continue to deliver good return along with margin of safety in near future.
Moreover, the rally in gold is sending a perplex and devious message for the world economy that needs to be ruminate somberly. In a highly dynamic and an exceptionally abnormal environment, conditions and trend are changing quite frequently, notwithstanding current outlook still appears to be positively biased to me, but it can reverse at any time.
Conclusion
Despite having strong momentum and positive price action, some of the indicators are evincing ambiguity in the form of overbought conditions and divergences. Though overbought conditions in a strong uptrend is quite normal and platitude that may last for few months, however, divergences could turn out to be a serious problem and can act as a sign of reversal. Technically, first priority has to be given to price action which is quite positive, hence buying and still seems to be good idea, but we should be alert and prepared with exit discipline if required.
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Trade your plan…! Be a Savvy Investor..!!
Pankaj