Weekly Market Summary
In my previous blog, I had mentioned that the implication of receding narrow trading range on Nifty could turn out be either sharp breakout or breakdown, so as this week market started off with breakdown and selling intensified until Thursday, even though Nifty recovered sharply on Friday, it has still ended the week with a net loss of 107 points or .99 per cent before settled at 10714. BSE Sensex lost 266 points or .75per cent to settle at 35423 in the week gone by.
FMCG emerged to be leading sector this week, though selected IT and pharmaceuticals stocks also did well.
Current Outlook
Though there is some minor technical damage that can be seen on daily chart, the weekly chart still shows Nifty continue to remain above secular bull market rising trend line, see chart below. Today, I am expressing my views and possible outcomes on weekly chart so that we can get an up-to-date assessment of the very long-term trend. Note that since March 14, 2017, Nifty stayed above the middle of the rising channel (green-line), however, after breaking down until it get back to the secular trend line on March 26, 2018, Nifty couldn’t get back above the middle of the channel (green-line). Moreover, since last two months Nifty is facing a stiff over-head resistance (red-line) at the middle of the channel. Therefore this could be a precursor to more of a correction than we have already experienced. A more aggressive outcome would be for Nifty to move down below the secular rising trend line. Certainly, other outcomes are possible, one of which is that the market doesn’t correct any more and just keep moving side-ways, or move higher.
The crude oil price is back with bang after a sharp correction, I assume that could be a problem for Indian equities in the backdrop of rising Dollar ($).
Conclusion
Now it seems Nifty to be headed to down to the bottom of the range. Currently, the pattern looks like a high-level consolidation, which appears to be harmless; however, such sideways movement will generate plenty of whipsaw signals. At the same time, Nifty overhanging at overhead resistance creating concern that the bottom of the channel range may not hold.
I welcome any feedback you may have about the content of this article.
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Pankaj