Weekly Market Recap
Last week I stopped with a conclusion that I would remain neutral in my expectation for this week, however, market rallied vertically even without having a pull back of single day this week. As a result major indices ended up with solid gains. In the week gone by, the benchmark SENSEX closed up with a gain of 1171 points, or 3% at 39298, and NIFTY surged 356 points, or 3.16% to closed at 11661, whereas BANKNIFTY which underperformed last week did well in line with other indices and gained 1077 points, or 3.84%.
Current Outlook
Last week I also wrote, if NIFTY closed above the head and shoulder pattern of which I have been discussing since last 2 weeks then I will pretty much give up the idea of prevailing weakness in the market. And, NIFTY closed precisely at the tip of the tilted right shoulder which can easily be taken away in next trading session provided the upside momentum is very strong. However, NIFTY has to close above that blue tilted line as seen in the chart below to bestow the weight of evidence for further rally. Now it appears that after crossing above the right shoulder rally may stopped at previous peak in the vicinity of 12000 mark as a result that could become a case of double top formation. However, at this point I don’t think that double top assessment would be as weak as the current head and shoulder pattern because right shoulder mark the lower peak that suit best for negative long-term configuration.
Moreover, market breadth this week was not consistently strong, though quite strong on Friday, however, the stocks made 52 Week lows have been persistently in favour of bears even on Friday as compared to stocks made 52 weeks high. In addition, rising stocks are rising with lesser volume that depicts vulnerability. Nevertheless, if price moves up smoothly then I think there is enough room to rally beyond previous peak as indicators has just turned up indicating significant upside. It is, however, apposite to wait patiently for next 2 sessions for confirmation. Hence, I think outlook is still neutral that will be cleared in next few sessions.
Conclusion
The market rallied but stopped at overhead resistance, even short-term indicators have room to rise, so there is potential for significant upside, but the market is vulnerable in the absence of good volume. If that happens, the intermediate-term indicators, which currently imply a favourable outcome, will probably top and head lower, thereby turning the outlook in that time frame bearish. Obviously, there are many other possible outcomes, but this is what I’ll be looking for. As for the double top issue, we have to wait patiently.
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Pankaj