Weekly Market Recap
After having a mild recovery in the early week, the indices and stocks price resumed their downtrend to post the lowest weekly closing in six months. Although decent recovery was being witnessed among heavyweights, it was fragile which got vanished as the week progressed.
In the week gone by the benchmark SENSEX lost 462 points, or .80% to close at 57527, similarly, NIFTY declined by 155 points, or .91%, and closed at 16945. While BANKNIFTY fell 0.5% yet the lowest closing in recent times.
Current Outlook
As it is clearly visible that the long-term trend of NIFTY has reversed from up to down as it has fallen below the 200-day SMA, and things don’t look good when it happens. A bounce of some magnitude was expected and the price got reversed just below the falling 21-day EMA (purple line), exhibiting the classic structure of the bear market. Moreover, the 21-day EMA has crossed below the 200-day SMA which further fortifies the inception of the bear market. Even a subtle bounce couldn’t last for a week, in fact, the price fell in a feverish manner thereafter means the market is sensing some serious problems in the future.
The VIX has alleviated nicely after attaining some sort of higher reading last week that suggests the NIFTY has established enough room to correct further. Furthermore, on the weekly chart, which is not enunciated here, NIFTY has closed down below the 50-week SMA which has acted as strong support in the past making the configuration more vulnerable to a deep correction.
Conclusion
There have been many instances in the history of this kind of configuration where the stock market fell incisively in a bigger way, however, there are few instances that went off track. So, before you go and plan your trading based on the given picture, it is important to note that this configuration is not infallible. Hence, find a decent entry level for shorting and keep a tight stop.
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Be Patient; Be a Savvy Investor..!!
Pankaj