Weekly Market Recap:
As the earning season progressed, market appeared to have lost upside momentum since post break out last week, thus lost it six week long winning streak and post its first weekly loss in six weeks. Selling is being witnessed among all the major sectors, especially in IT, pharma and heavy-weight auto stocks.
The BSE Sensex ended 54.32 points or 0.16 per cent lower at 34915, while NSE Nifty settled at 10618, down 74 points or 0.69 per cent.
Current Outlook:
On the back of earning season, I have been expecting market to be in range bound and did not expect Nifty to break out decisively above 10600 zone, but it happened last week only to turned back to the same zone this week. I have found that failed up-side break out has a tendency to turned out to be in a significant down trend as it could be the case this time, see the chart below.(click on chart to expand it)
I think, this is not a good signal and in addition to this, market breadth (net of advances and decline), a prominent indicator to me to gauge the health of the overall market happened to be quite weak this week. In spite of showing a good set of quarterly earnings and monthly sales figures, auto stocks are correcting persistently, again a sign of weakness. Moreover, break out above 2 years old range in crude oil prices on Friday may put further pressure on Indian equities.
Hence, I have many more reasons to strengthen my conviction that we might be in corrective mode and indices may remain in range bound territory with negative biased.
Conclusion:
Although indices may continue to trade side-ways, however, I would prepare myself for a shorting opportunity in technically and relatively weaker group of stocks. Hence, I would advice to keep stalking and routinely track the portfolio and be prepared to execute a selling discipline if required.
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Keep stalking..!! Be a Savvy Investor..!!
Pankaj