Weekly Market Recap
As I wrote, until last week market didn’t fall in line with prevailing highly negative sentiments caused by surmounted COVID-19 related deaths on daily basis, in fact market was quite resilient and absorbed the negativity while holding the major horizontal support (green line on the chart below) that eventually fuelled another up leg up to the higher end of the range. However, that rally appeared to be fizzled out on Friday still major indices posted a solid weekly gain.
In the week gone by the benchmark SENSEX gained 903 points, or 1.89% to close at 48782, similarly, NIFTY surged 289 points, or 2% to settle at 14631. While BANKNIFTY outperformed with a gain of 3.34%.
Current Outlook
The dominant and pivotal feature on the chart is the false breakout above the declining channel (falling blue line). This is not an inspiring configuration. As false breakouts are often followed by above-average price trends in the opposite direction of the original signal. Until last week, the pull back on NIFTY was building compression that produced an incisive rally to the higher end of the falling channel, on Thursday (expiry day) it appeared to have given a decisive breakout but couldn’t last passed day which is appearing to be the classical example of false breakout. If that is the case, then I think, the horizonal support (green line) which has been respected so far could be broken this time. The fuel which was accumulated in past two week utilised fully and now tank seems to be empty to produce a cascading fall.
Moreover, the current rally was mainly driven by the financials, in past one month they had fallen significantly, hence some sort of opposite reaction was plausible which appears to be done, amid positive earnings delivered by couples of banks in on-going earning season. Interestingly, metal and steel stocks continued to rise further, but they look quite vulnerable on charts as almost all of them are having a parabolic advance, quite often that tends to correct sharply.
There is enough to add about the best possible outcome of my analysis, but to be precise I would like to pay attention on the above said configuration. As long as NIFTY holds last week low outlook is reasonably positive for the market falling below could be devastating.
Conclusion
As I wrote last week, shorting is not an easy task in this market, but going long is not a great idea either. Although, false breakout produced a shorting opportunity with stick stop as direct retail participation is still low and unexpected rally can be seen anytime. However, one can wait patiently as perseverance is the key.
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Be Patient…; Be a Savvy Investor..!!
Pankaj