Weekly Market Recap
As expected, this week started off on a positive note after bouncing from the support last week. NIFTY has a nice up move till mid-week followed by some corrective action on Friday, overall the week was positive.
In this past week, the benchmark SENSEX gained 360 points, or .60% to close at 60621, similarly, NIFTY gained 71 points, or .40% to close above the 18K mark. While BANKNIFTY had a muted response and gained .32%.
Current Outlook
Last week, I mentioned the first overhead resistance for the NIFTY is 21-day EMA (purple line) and 50-day SMA (green line), the 21-day EMA barrier was smoothly crossed on Wednesday, however, Friday closing was slightly below that level which is crucial to ponder. In a classic downtrend market, the prices tend to get reversed from their moving averages that eventually emanate a lower-highs and lower-lows structure. Conversely, it’s a vice-a-versa in a solid uptrend.
As we can see on the left side of the chart from May 2020 till Oct-22 the NIFTY stayed above the said moving averages and took support at them which in turn above the 200-day SMA (black line). The trend was “long and strong”. Look at the right half of the chart, until mid-June 2022 the NIFTY was having a lower-highs and lower-lows structure, but had a couple of whipsaw signals means crossed above and below the moving averages.
Now, the price is struggling to remain above the short-term moving averages, but at the same time is comfortably hovering above the long-term 200-day SMA. Until the price stays above this long-term barometer, the conditions are more likely to be ideal unless proven otherwise.
Conclusion
Despite having wild swings in the last year, NIFTY remains sideways, in fact, managed to stay into bull territory that is above 200-day SMA. It is important to see whether the enthusiasm that helped the market to find support at recent lows remains or fade.
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Be Patient; Be a Savvy Investor..!!
Pankaj