Weekly Market Recap
Market wobbled and tumbled as a result the indices tanked over 5% this week. Since the rally failed at a crucial resistance level in the last penultimate week, NIFTY has been continuously drifting lower and broke below the major double-bottom support. It is the biggest weekly fall in the past two years when almost all the major sectors in NIFTY fell in tandem.
In the week gone by the benchmark, SENSEX tanked 2943 points, or 5.42% to stop at 51360, similarly, NIFTY plunged 908 points or 5.61% to 15293. BANKNIFTY also fell over 5% in line with major indices.
Current Outlook
Last week, I wrote that double-bottom is the only condition that can easily be failed in a classic downtrend like this. The bearish outcomes are more likely than bullish after rallying to some extent. There are important resistance levels where this bounce could fail, and we have seen it in past two weeks. NIFTY broke another support (double-bottom) this week where broken support may turn into resistance because this is where supply last overpowered demand.
Now, we know it is bad out there – I don’t have to tell you that. We can see in the chart that the price is below the moving averages and short-term moving averages is below the long-term moving averages. Perfect conditions for the downtrend market.
I think traders and investors have understandably gotten much worried about inflation and imbued by the fall in the currency. Although the recent inexorable torrential fall suggests some sign of exhaustion on the daily chart as indicators have approached the lower levels that can lead to a pause in the downfall or a bit of bounce to the broken support level.
However, on the weekly chart, the configuration is quite untoward and pernicious suggesting a significant downside from the current level. Moreover, in a concerted downtrend, it is possible for the stocks to ignore an oversold condition.
Conclusion
In a couple of years, when we see the biggest oversold condition, it tends to draw our attention and tell us that some bounce or a pause is quite possible. It’s certainly possible we may rally as we do have oversold indicators out there but given the high volume of selling and a strong downtrend, I doubt any rally will be sustainable. Hence, I think the bear market rally isn’t likely in the cards yet. Therefore, be patient.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj