Weekly Market Recap
In contrast to doldrum last two weeks, the bulls resurrected with a vengeance this week and drive the market to new all-time high. The conditions which appeared to be deteriorated until last week changed rapidly on Monday followed by decisive breakout above the two months trading zone on Tuesday as a result NIFTY continued to rise throughout the week but off its high before closing on Friday.
In the week gone by the benchmark SENSEX surged whopping 3.22% or 1690 points to finish the week at 54277, similarly, NIFTY took a jump of 475 points, or 3.01% to settle at 16238. BANKNIFTY also rose in tandem with broader market and gained 3.54%, but yet to achieve its previous high.
Current Outlook
The dominant feature on the chart is decisive breakout above the two months rectangular trading zone as can be seen in the chart below. Until past week, we had enough veritable evidence that were suggesting being cautious on the market, however, the picture changed rapidly when the broke-out occurred on Tuesday. And, then it was quite evident that the fresh leg of rally has started which can take out the NIFTY to greater heights. Like I wrote, the longer it takes, the farther it goes. Not only that post breakout the index or stocks move ostentatiously which is not easy to capture.
Now, the upside momentum is quite strong and the breakout level which is 15900 on NIFTY should act as next strong support. Falling below that level will raise the question of sustainability of this uptrend, however, as long as it stays above that level, we can expect higher levels on NIFTY.
Nevertheless, my concern about the participation or market breadth still in play. Though, the breadth was strong on breakout day, but it didn’t synchronise with breaking out condition in past two days as it has again started to deteriorate. That suggest we are now in the throes of a different kind of market controlled by exogenous forces. Although, this condition doesn’t assure the immediate reversal in the market, in fact may continue to be the same for quite some time, however, it does provide a useful indication to remain cautious to the problem.
In nutshell, the outlook which changed rapidly this week may remain ameliorated if stays above the breakout level.
Conclusion
The stocks which have given fresh breakout in line with market can be considered to get into at support level. However, the stocks which are floundering or not participating should be avoided completely. These kinds of rally are often tantalising, but never chase a running stock or index, let the stock come down at support level and then make an descent entry. Be patient.
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Be Patient…; Be a Savvy Investor..!!
Pankaj