Weekly Market Recap

Since last two week I had been writing and expecting for the market to take direction soon, though as per my analysis I was hoping for mild or sharp correction. And this week, I would say market correction was more than the mild if not sharp. In the week gone by, the benchmark SENSEX lost 777 points, or 1.97% to close at 38736, and NIFTY was down by 258 points, or 2.19% ended at 11552.

Current Outlook

After having a tug-of -war between demand and supply at higher level, the demand seems to have loosen the grip, consequently supply remains to be on dominant side throughout the week that resulted in correction. Today, I am depicting both weekly and daily chart of NIFTY to express my view. First, below is the weekly chart where I see the double-top formation about which I have discussed in past.  After making a double-top at 11800 NIFTY corrected up to 11100 and rallied again post-election outcome and made a new high at 12100, however, NIFTY couldn’t sustain over there despite having a strong macro factor and that was the first sign of prevailing weakness in the broader market. Most importantly, false breakouts are often followed by above-average price trends in the opposite direction of the original signal.

Second, below is the daily chart and the dominant feature of this chart is gap support which has broken down and the same support has become a resistance which is bearish in nature and sign of weakness. Most importantly, earning season has started which(earnings) is the indeed driver of the prices and that is the only hope for the NIFTY to get back or hold the support. Any slow down in earnings could significantly impact the market provided valuation is already high.

Hence, technically outlook is not positive and we may witness more correction in next few days.

Conclusion

The market has given a sign of weakness, and the technicals are hinting strongly that we’re probably going to see more correction in next few days or week. We have a earning season, and the market is overvalued. The advance has not been broad based but the decline is. Hence, I think we’re going to hit a rough patch soon.

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

Happy Charting.!; Be a Savvy investor..!!

Pankaj