Market Recap:
The market put up their best weekly performance in last two months, with Sensex and Nifty gained 1.8% and 1.5% respectively. Beaten-down sectors like technology and pharma drove the rally last week. Although knee-jerk reaction was seen on Friday opening amid elevated military tension over a missile launched by North Korea, however, market managed to recover in last hours and successfully hold the weekly gain.
On Thursday inflation data released, consumer price index (CPI) rose to a four month high in August to 3.36% from 2.36% a month ago on the back of soaring food and fuel prices, dampening hopes of any interest rate cut by the RBI when it reviews monetary policy in October. In another economic data released on late Friday, India’s current account deficit (CAD) soared to four-year high of $14.3 billion, or 2.4% of GDP. In the June quarter as gold imports picked up ahead of implementation of the GST starting 1 July. In the March quarter2016-17, CAD was 0.6% of GDP at $3.4 billion.
Current Outlook:
Market is back to all time high made in August. Below is the chart of Nifty50 of last nine months that shows it. Technically, it is visible that the horizontal line drawn from previous high would act as a resistance that is where exactly the market stopped from gaining further. Moreover, the market breadth (net of advances and decline) data in last week was not encouraging enough to believe that further break-out above resistance is easy task.
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However, during the brief correction in last few weeks price action in Nifty50 never challenged to broke down the rising trend line and this line act as a strong support.
Conclusion:
I expect the market to spend next few days between horizontal resistance and rising trend line before any decisive break out or break down occurs. Since we are in strong bull market the biasness is toward breakout above resistance, but the key is to keep a tight stop just below a support area. But my strategy is to find out the companies that not only reported great results in the prior quarter, but also showed major accumulation at the time, and just after, that earnings report was released. Over the next few to several weeks, these companies pull back on lighter volume and prepare for the next earnings run. That’s where planning and doing your homework become so important.
Do your homework….Be a SAVVY Investor!!
Pankaj