Weekly Market Recap
Last week, I wrote that we may see a short-term bottom next week; this appeared to be true this week, Nifty, after surviving the recent lows in Thursday trade at 10139, managed to bounce-off sharply to close at 10473 on Friday. (see the chart below).
In the week gone by, the Sensex closed at 34733, with a gain of 359 points, or 1.04% and Nifty added 156 points, or 1.51% to settle at 10472, whereas, Banknifty outperformed gained 952 points, or 3.92%.
Current Outlook
VIX, a prominent indicator at this juncture, cooled-off a bit after touching a level of above 22, now at 18.63, also suggest that we have seen a short-term bottom. Market breadth (net of advances and declines) also improved significantly in Friday trade supporting the conviction of short-term bottom we have seen this week.
Swing traders who want to try to pick a short-term bottom may do it, but I wouldn’t jump in until I see a veritable improvement in charts as “The road to trading glory is littered with the bodies of those who tried to pick bottoms.” Last week I also wrote “If I talk about money rotation, I don’t think money is rotating to any area of the market, but only exiting. Even though dollar is at all time high, still IT stocks were under pressure, I find that to be important because it tells me something.” This week IT stocks were down significantly, I think this down trend may continue in next week.
Although, I think buying opportunity is emerging in selected pharma stocks for a long term basis as the delineation of technicality portends a rally of some magnitude is coming. Of course, tight stops and a commitment to execute them are part of the equation.
Conclusion
A scary week of selling ended on a positive note, however, likely outcome would be — more chopping around for a few days, and a retest. Normally, after this scary move people tend to use any rally as an opportunity to raise cash. I am quite sanguine in my belief that market will provide good opportunity to trade on either side if we wait patently.
I welcome any feedback you may have about the content of this article.
Invest patiently..; Be a Savvy Investor..!!
Pankaj Saini