Weekly Marker Recap

Last week, I wrote about the possibility of double top on NIFTY and this week we witnessed that NIFTY faced stiff resistance precisely at the same level as can be seen in weekly chart below. Although, whole week NIFTY gyrated near the top with minor correction without any significant pull back, however, upside momentum seems to be diminished during consolidation.

In the consolidated week gone by the benchmark SENSEX lost only 95 points, or .24% to close at 38767 and NIFTY was down by 22 points or .19% to settle at 11643.

Current Conclusion

Currently, the dominant feature on both NIFTY and SENSEX is double top formation that has to be resolved in next few days. I think, consolidation at higher level without having any meaningful pull back is a sign of strength that may eventually lead to breakout for both indices. BANKNIFTY has already seen a mild correction after touching at new all-time high which is again a positive signal as any further rally in financials will lead to breakout in NIFTY as financials have maximum weightage in major index. Moreover, again we have a clear case of fair breadth, though not very strong may support the advance.

I would still suggest that it is better to be a stock specific rather to chase the index as there are goods stocks available at nice entry point which seems to have huge upside potential within the range bound market. While configuration are in favour of bull, but market is at major double top resistance along with diminishing momentum and slight negative divergence on indicators suggest warrant of caution. Hence, we should not ignore the overhead impediment unless it proven otherwise.

Conclusion.

Significant resistance, loss of momentum, negative divergence and thin volume are just a few of technical issues that concern me. I am of the opinion that it is not a good time to open new longs on indices, unless a major double top is out of the question. I expect individual stocks to be relatively better to have long position, no guarantee, but that is pretty possible.

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

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

Pankaj