Weekly Market Recap
As expected, this week started off with selling which intensified till Thursday on weekly and monthly F&O expiry day, however, some relief rally came in on Friday post-RBI monetary policy announcement and recoup half of its losses; eventually NIFTY managed to close above the 17K mark.
In the week gone by the benchmark, SENSEX lost 672 points, or 1.16% to close at 57426, similarly, NIFTY shed 233 points, or 1.34% settled at 17094. While BANKNIFTY fell a notch extra and was down 2.31%
Current Outlook
Technically, by following the most basic and simple pattern we were aware that the markets may come down as in the past year it has been extremely common for the NIFTY to rise and fall sharply. Though the rise and fall were quite random yet consistent and within this randomness, there is a pattern emerging tilted downward. The potential downward target of this pattern is at the lower end of the channel from where we saw a vertical rally. It is indispensable to note that unlike the past two lower peaks in January and March the last rally took off the price above the upper end of the channel. Technically, it was the inflection point where the sign of strength was developed, but sooner it turned into a false breakout that proved to be an upthrust after distribution. I have mentioned the implication of false breakout in my previous blog.
Moreover, the rapidly withering market breadth is a sign that buyers are mostly gone, while the sudden resurgence of buyers at lower levels needs to be considered. I think, if NIFTY managed to take support at the middle of the range on the green line, like in past it has acted as a resistance marked by red arrows; there is a possibility uptrend may resume. However, failing to do so may invite fresh selling which may intensify in a foreseeable future.
Conclusion
In the end, the market trend may well again be defined next week, unless a new buy signal is indicated, the trend is down. This means that, until we get a valid buy signal, the path of least resistance remains down.
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Be Patient; Be a Savvy Investor..!!
Pankaj