Weekly Market Recap
Since the NIFTY started off the previous week with the plunge and closed higher, in the follow-through week, the market continued to make progress as the price worked its way higher. Looks like NIFTY gradually setting up the pace for the upside. Though again we saw the knee-jerk reaction on Tuesday after having a strong start, indices managed to hold up throughout the week.
In the week gone by the benchmark SENSEX gained 1573 points, or 2.97% to close at 54481, similarly, NIFTY added 468 points, or 2.97% to reach 16220. While BANKNIFTY led the advance with a gain of over 4.5%.
Current Outlook
Last week, I wrote that the then price behavior is suggesting the absorption of selling by the strong hands at the lower level that indicates buyers at the dominant position which may lead the prices higher in the forthcoming sessions. As expected, the price continued to move higher this week. If we look at the chart below, at the current level, NIFTY has returned to the falling channel and is above the 50-day SMA (green line). Two out of three times NIFTY has climbed off to the top end of the channel as enunciated by green lines, which means the price has the potential to go to the upper end of the range. The big challenge for the next week is to remain in the channel, succeeding in that may further accelerate the advance.
Although the recent action has been trending higher, it is hard to say that it is a change of downtrend. However, it has developed the possibility of further upside and the condition is changing from awful to less awful. Perhaps, the market is getting more constructive here, and I continue to look for entry opportunities with a tight stop.
Of course, a lot of price movement could be determined over the next few weeks when earnings start coming out in droves. And it’s hard to say whether the market has factored in good or bad earnings. Certainly, we could see renewed selling, especially if earnings do indeed come up short. However, given the configuration, I still like the reward-to-risk, which, I believe, is currently to the upside, at least in the short term.
Conclusion
Since the market is off from its lows it has moved up significantly. There are several stocks that have gained substantially, but the ride wasn’t easy and smooth. This behavior is making my conviction stronger that we may see some more upside in the near term before going down again.
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Keep Analysing; Be a Savvy Investor..!!
Pankaj