Weekly Market Recap
The market underwent the consolidation phase for the second week in a row, though the week started off with a sharp pullback as expected towards the level from where the lopsided rally began in early September to an all-time high, however; indices managed to recoup their losses to end the week in positive territory.
In the week gone by the benchmark, SENSEX ended with a marginal gain of 167 points or .25% at 65995, whereas NIFTY remained absolutely flat with a gain of .08% at 19653. While BANKNIFTY remained under pressure with a loss of 0.5%.
Current Outlook
In my last week’s blog, I mentioned that statistically, we are heading to towards the strongest quarter (October to December) of the year. Nevertheless, I have pointed out the current technical setup is suggesting otherwise. This quarter has a long history of being up most of the time. But even with the strong history of being a positive quarter, we have seen few instances of stock prices stumble, or at least chop sideways during this time. The current sideways or choppiness in stock prices fits that model pretty nicely.
Soon earning season will kick off which will define the next course of direction until then I think, stock prices have a reason to remain sideways for some time. So far, in the past three years, every consolidation and pullback has turned out in the favor of bulls which suits perfectly with this strong time period of the year.
However, based on my assessment of the many stocks’ price movement I am getting skeptical about the uptrend or rather find myself slightly bearish. Furthermore, there is an ambiguity among groups of stocks few are showing a sign of accumulation while few demonstrate a pattern of distribution. The best-case scenario could be the large consolidation phase for the next few months.
Conclusions
In some ways, this is the easiest phase to play, because at some point the sideways pattern will be completed. If the price breaks above the upper boundary, that would indicate that buyers are taking control and are willing to pay more for the stock. If the price drops below the lower boundary, that suggests that there is a lack of willing buyers or additional selling pressure. Usually, a stock breaking out of the consolidation phase can soon be relabeled as an accumulation or distribution phase, based on the direction of the breakout. Meanwhile, it is prudent to enjoy the market from outside unless the breakout or breakdown begins.
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Enjoy the Ride; Be a Savvy Investor..!!
Pankaj