Weekly Market Recap
In yet another fourth consecutive week the stock prices continued to slide further causing the correction to get deeper. By the end of this week quite substantial damage has been done on the chart as the indices closed at the lowest level in the last two years. Now the question arises, are we entering the bear market?
In the week gone by the benchmark, SENSEX plunged 1524 points or 2.73% to settle at 54333, similarly, NIFTY lost 413 points, or 2.38% to close at 16246. While BANKNIFTY which appeared to be resilient in the past two weeks has emerged as the top loser by declining over 5%.
Current Outlook
The difficulties of the stock market are on the rise as major indices have broken their key support levels. As we can see below on the chart that NIFTY has decisively broken the 200-day SMA (black line) and most importantly has fallen below the shaded rectangle that may initiate a fresh new leg of a larger downtrend. A few weeks ago, I wrote about distribution and accumulation, both begin in nearly the same manner but conclude differently. A Distribution is a range-bound price structure that precedes a markdown (downtrend) after completion of the prior uptrend. The below structure shaded portion seems to be the perfect example of the nasty distribution where every rally harbingers an impression of buy on dips sort of market. However, as I mentioned the price’s inability to cross above its previous peak and make persistent lower highs was a serious cause of concern. And now we can see the outcome.
Furthermore, the NIFTY is below its 200-day moving average that depicts the change of the trend. The indicators are persistently rolling down and have enough room to fall further before the oversold condition developed. The market does not always reveal all of its secrets. However, it gave ample sign of warning to exit or to have the minimum exposure. Even if we cannot identify the “why” or the length of the fall, we can at least realize that the structure is not propitious for buyers. It is neither important nor required to understand the “why” phenomenon, however, if we analyze the structure with nuances, we can use it to our advantage.
Conclusion
Though the distribution is quite evident at this juncture, however, the green shoot could be NIFTY rise back in the shaded portion and take support within that region, falling to do so may lead to sharp pullback from the current level. Hence, we need to be patient and watchful; and analyze the movement profoundly.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj