Weekly Market Recap

In continuation with last week price action behaviour, market this week remain hovered in a narrow range, perhaps, in the back drop of earnings. It was a volatile week both Sensex and Nifty after oscillating more than 600 and 130 points respectively, finally settled at the middle of the range.

The benchmark Sensex ended the week with a gain of 314 points or .88%, settled at 36009, similarly, Nifty added 67 points or .63%, closed at 10794.

Current Outlook

The range of the market in last one month has been descending as we can see in the chart below, which led to the formation of symmetrical triangle. Intentionally, I depicted the chart of 1 month on a time frame of 1 hour, just to demonstrate the subsiding of the trading range, Normally, I don’t follow the 1 hr chart.  It is quite likely for the market to behave like this before the impending events like earnings. The Q3 earning season has started. The good news is we haven’t witnessed any negative surprises on earnings, and the bad news is we haven’t seen any positive surprises yet. Although, earning season is just started and major companies are yet to declare their Q3 results in coming days, therefore it will be too early to conclude anything yet.

However, the upward momentum on Nifty appears to be slowing down as a result Nifty has not been able to cross the stiff resistance at 10970, which is quite essential to break if Nifty has to move up. As I stated above we are seeing a symmetrical triangle on Nifty, implicated breakout or breakdown target could be significant; at least to the equivalent to the height of the triangle, which is 400 points up or down (depicted in chart, click on it to expand)

Moreover, in last quarter earning we haven’t seen stocks reacted positively on good news, rather they reacted negatively with more or less amount of magnitude on small miss on their earnings. This is the basic and foremost difference between bull and bear market. Hence, for the Nifty to be resolved in upward direction from symmetrical triangle, their constituents has to react positively on normal earnings and should abandon the negativity on small miss.

Conclusion

Fundamental drive the market which is none other than earnings. So far I was sited in a bear camp, but in the backdrop of earning season and after witnessing slowing momentum in the market, I would like to be neutral on my view, but with negative biased. First and foremost, how the market react on earnings that will define the direction for the market out of symmetrical triangle. Technically, there is 50% probability to go on either side post triangle formation. Assuming that positive results could override the negativity and that will eventually take the market higher. Otherwise, I think we are at the end of the short-covering rally that began off the December lows and decline will resume sooner than later.

I welcome any feedback you may have about the content of this article.

Be patient..! Be a Savvy Investor..!!

Pankaj