Weekly Market Recap
We have witnessed an ostentatious yet stupendous rally in the past few weeks which has led to the climactic surge early this week that was followed by a sharp reaction in the opposite direction as a result NIFTY posted a first weekly negative closing, though marginally, in past eight weeks.
In the week gone by the benchmark SENSEX was down by 376 points, or .53% to close above the 71K mark at 71106, similarly, NIFTY shed 107 points, or .50% to settle at 21349. While BANKNIFTY fell 1.35% on the back of some profit booking after a fabulous rally.
Current Outlook
The dominant feature on the chart is the buying climax followed by the opposite reaction; ideally, that is how the strong bull market comes to a stop or halt at least for a time being. Technically, the climatic surge led to a sharp correction which ultimately led to the range-bound conditions for the market. To some extent, the market has fulfilled that criteria and it is quite likely that the market may continue to spend some time in between the climatic high and the reactive low. In that sense, we can expect the NIFTY to hover between the support and resistance as defined in this week as can be seen in the chart below.
While, in some cases, preliminary action occurred before the final climactic action took place. if prices continue to move higher smoothly above the recent high then the current top would act as an initiative climax that will open the way for the prices to move much higher before the cardinal top occurred. On the contrary, if the price drops below the support, then further corrective can be seen.
However, it is important to notice that liquidity doesn’t seem to be a problem at all even at the higher level. The market breadth has been consistently strong except for the one corrective day and the volatility index is not showing any sign of worry which suggests that the current rally still has enough room to move forward.
Conclusion
The best-case scenario could be the range-bound condition going forward at least for a time being, however, provided liquidity is enough to push the prices higher shorting in this market is not a good idea, instead one should try to buy at the support level. Surprisingly, many stocks are still providing nice and decent entries, but always remember to keep a tight stop after such a vertical and lopsided rally.
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Be Disciplined; Be a Savvy Investor..!!
Pankaj