Break-out and then Sharp Pull back..!!

Jun 9, 2019 | Strategy

Weekly Market Recap

Another week of consolidation and false breakout to above 12000 mark on NIFTY. This is third week in a raw when NIFTY crossed above 12k but failed to sustain above that level, similarly, SENSEX failed to stay above 40K mark.

In the week gone by, the SENSEX shed 98 points, or .25% to closed at 39615 and NIFTY was down by 52 points, or .44% to settled at 11870.

Current Outlook

There is seems to be tug- of -war between demand and supply at 12000 mark on NIFTY and at 40000 on SENSEX. Selling enthusiasm appears to be high at above 12000 on NIFTY consequently, we saw a sharp decline thereafter, similarly, buyer happened to be dominating when NIFTY departs below 12000. There is no follow through in NIFTY above and below the 12k mark as a result NIFTY is still hovering at break-out zone post double-top  formation as depicted in chart below. And my double-top scenario is in jeopardy, but still valid.

There is a lot to talk about this chart – below rising green line(or support line) is cyclical bull market rising trend line that was violated in a dramatic fashion on 1st -oct 2018 and thereafter NIFTY has been struggling to cross above that line, technically the same support line turned out be a resistance line. Despite, had a big macro factor (election outcome) NIFTY is struggling to sustained above that line. Moreover, market breadth is still the concerned as if we had through-out in 2018 and that was followed by sharp decline in early October and since then NIFTY hasn’t been able to get back in an up-trend as areas between top red line and bottom green line is supposed to be a trend channel. Technically, stock or Indices tends to be remain in trend as long as it is not broken. Hence, first NIFTY has to trade above rising green trend line to get the strength and move higher further.

Conclusion

The RBI rate cut this week couldn’t spark the rally rather market reacted negatively on RBI commentary on weak and delayed monsoon, but in the meantime major indices are well with-in reach of new all-time highs that is positive. However, witnessing sharp pull back at higher levels along with narrow participation demonstrate internal weakness. Hence, caution is warranted.

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

Stick to your Model…!; Be a Savvy Investor..!!

Pankaj