Weekly Market Recap
The rebound that occurred last week found its way extended into this week and became stronger. Finally, some positive signs appeared amid negativity and pessimism as NIFTY managed to jump above the crucial blue horizontal line which had turned into resistance after acting as strong support in the past. Eventually, indices ended the week with solid gains.
In the week gone by the benchmark, SENSEX gained 2313 points, or 4.16% to close at 57863, similarly, NIFTY surged 656 points, or 3.95% to settle at 17287. While BANKNIFTY rose one notch extra and gained 5.45%.
Current Outlook
The dominant feature on the chart is NIFTY reclaimed its renounced support with decisive gap-up opening and held it strongly. The “green-shot” which I have been talking about for the past two weeks is the same blue horizontal line which is coinciding with the 200-SMA (black line). As I mentioned last week that we are seeing a case of too much of a bad thing, which could turn into a good thing. The sharp rebound came just in time when the indicators in the below panel reached the lower level which was the case for over-sold conditions.
Now, we have to see whether the new uptrend has started, or it is just a temporary rebound after the type of warning shot or a “sign of trouble”. As most highly negative sentiments or pessimism may lead to a sharp rebound beyond our expectations, in fact, in some cases it may rise to the new all-time high. Though at present there are myriad possibilities, however, the upside momentum is quite strong that favors the bulls. If NIFTY corrects with less volume and holds that horizontal support, it could be a decent buying entry.
But if that support is broken again, then it is still possible that greater ugliness is in store. So here we all need to prepare for all the possibilities. Hence, the outlook is cautiously positive.
Conclusion
It’s an old saying “There is a time to go long, time to go short, and time to go fishing.” With this bounce, the NIFTY has back into the consolidation zone amid so much volatility and negativity that suggest indices may remain sideways for an extended period of time favoring “fishing” days. The short-term trader may find some opportunities, but for medium to long-term investors, it’s best to sit back and let things settle down before planning your next move.