Weekly Market Recap
It has been quite a volatile week for the market. As expected, NIFTY gained sharply from last week’s oversold reading and continued to rally post-budget, however, the sharp reversal also being witnessed thereafter consequently, indices eroded the half of its gain, but still ended the week with decent advance.
In the week gone by the benchmark, SENSEX surged 1444 points or 2.53% to 58644, similarly, NIFTY added 414 points or 2.42% to 17516. While BANKNIFTY continued to outperform in the fourth straight week with a gain of 2.92%.
Current Outlook
Technically, the current picture on the daily chart is the range-bound scenario while we have seen sharp gains and falls since the all-time high made in October 2021 and the low in December. The NIFTY has corrected more than 11% from its October high of 18604 to the December low of 16410. After having a sharp fall or shake out in December it bounced back towards the all-time high then I mentioned the possibility of double-top formation and thereafter it fell again sharply towards its low. And currently NIFTY is resting at the middle of the range which is also coinciding with the 50-day SMA (simple moving average) green line as enunciated in the chart below.
I think of the market in three phases: accumulation, distribution, and consolidation. And within the consolidation phase either the accumulation or distribution take shape. Sometimes it’s quite difficult to figure out whether the accumulation or distribution is taking place as the difference between them is quite subtle especially in the initial phase. We can only have some idea if we dig deeper and analyze the nuance of the chart in the all-time frame with an askance view. However, during distribution, the volatility increases at a higher level followed by a sharp pullback. Most importantly the rallies typically fizzle out at one of the key resistance levels during distribution. While during accumulation volatility tends to be low and selling is being absorbed gradually at higher levels that may result in higher highs and easily breaking out above prior market highs.
So far, we are seeing a characteristic of distribution as sharp pullback has been witnessed at a higher level. It is not clear though, as demand is also available at a lower level that may turn out to be an accumulation. However, the bulls have a ton of work left to do before we call it an accumulation.
Hence, the outlook doesn’t seem to be quite favorable for buyers at least now.
Conclusion
I think the current consolidation phase may continue to progress for quite some time. We need to wait patiently, the market shall give us a signal about impending movement, it’s better to reduce the long position or have less exposure. Perseverance is the key.
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Be Patient; Be a Savvy Investor..!!
Pankaj