Weekly Market Recap

Last week the heading of my blog was “Upside seems to be over, Downside is coming” and the market treated my assessment pretty well, as over all market continued to drift lower from Monday to Friday this week. In the week gone by the benchmark SENSEX closed down by 1149 points, or 2.96% at 37673, similarly, NIFTY lost 337 points, or 2.93% settled at 11174, whereas BANKNIFTY deteriorated significantly and lost 2144 points, or 7.18%.

Current Outlook

On Friday, RBI cut the repo rate by 25 basis point and I was pretty sanguine about rate cut as the governor is the government’s man and the government is not letting any stone unturned to arrest the downfall in the market. However, rate cut didn’t support the market, in fact market slide sharply after the announcement. The dominant feature on weekly chart which I assessed and noted last week was possible impending head and shoulder pattern formation; and the pattern seems to have earned some validity by the end of this week as can been seen on the chart below (click on the chart to see the expanded version). This week downfall was quite substantial, therefore, it is apposite to expect a bounce-off of some magnitude in coming week. Although, the indicators in the lower panel of the chart suggesting, there is enough room for them to come down, favouring bears.

However, on the positive note, on the short-term daily chart NIFTY seems to have stopped precisely at the horizontal blue line (see chart below) which has acted as a strong resistance in past, before it was taken out post corporate tax announcement, may now act as a support, favouring bulls.

Hence, the upcoming week is crucial to define the outlook for the market, though long-term price action is having negative divergence with the indicators suggesting weakness in foreseeable future.

Conclusion

It wouldn’t be inappropriate to expect a bounce on NIFTY based on decline in price stopped at support line, but there is plenty of room for more downfall. The dominant feature continues to be head and shoulder pattern on weekly chart, unless it resolved otherwise, one way or the other, next week.

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Keep Analysing..!, Be a Savvy Investor..!!

Pankaj