Weekly Market Recap
Last week I concluded with a caution note; this week precisely started off in line with my analysis and expectation when NIFTY fell sharply on Monday and Tuesday. However, NIFTY once again found good support at the lower end of the range and recovered sharply to recoup most of the losses.
In the week gone by the benchmark SENSEX lost 164 points, or .31% to close at 52975, similarly, NIFTY shed 67 points, or .42% to settle at 15885. While BANKNIFTY couldn’t recover much and lost 2%.
Current Outlook
Last week, NIFTY broke into resistance to make a new all-time high, but at the same time market gave enough clue to not to be trusted that breakout as participation or market breadth wasn’t strong enough to support the rally above resistance. As a result, a sudden and sharp reaction occurred earlier this week. The indices returned to the two-month support line. This is a very critical and interesting juncture for the NIFTY. Since, early June there is well-defined rectangular formation on the NIFTY having width of 300 points. NIFTY doesn’t seem to be in a hurry to get out of this range. However, it seems like a descent accumulation or distribution taking place which can produce a meaningful appreciation or depreciation from here. The breaking into the resistance (red line) last week followed by sharp and sudden correction up to the support line (green line) and then again followed by descent rally up to the resistance, could be a bullish occurrence. However, market breadth which appeared to be strong at support zone turned wane into the resistance. That is a cause of concern and suggest NIFTY may spend some more time in this range unless supply is being absorbed. A jump and out would be evidence of overhead supply being absorbed. Therefore, we should watch closely for this possible outcome.
On the other hand, falling back to the support with weak breadth would demonstrate the different picture. That might suggest the occurrence of distribution which can produce the significant downfall. Hence, at present the conundrum is not solved, but the outlook appears to be slightly in the favour of bulls.
Conclusion
Market remains at critical juncture but would be out of this range soon. we have seen a nice scary selloff that worked well to do the job of frightening investors away. However, we should watch closely for the next step.
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Keep Analysing…; Be a Savvy Investor..!!
Pankaj