Weekly Market Recap
The rally continued in the second week as investors remained in a risk-on mode that helped major indices to zoom to a fresh peak. Technology stocks remained buoyant and witnessed robust buying followed by recovery in big financial stocks, while pharma stocks slipped.
Nevertheless, the benchmark SENSEX advanced 1159 points, or 2.14% this week, and breached 55K mark to reach 55437. Similarly, NIFTY breached the 16500 mark and surged 190 points or 1.79% to its fresh closing peak of 16529. While BANKNIFTY still striving to scale above the previous peak and gained 1% this week.
Current Outlook
The dominant feature on the chart is the consolidation followed by breakout, precisely the same pattern appeared this week as well. Before breaking out above 15900 last week, NIFTY consolidated for almost two months in a shaded rectangular formation about which I have written a lot in my last few blogs. Exactly, the same pattern is being witnessed this week as well, as we can see in the chart below, NIFTY has consolidated a bit in a narrow range of 100 points for a week to gather some fuel and then rallied to a new peak.
NIFTY is closed at a fresh all-time high, technically there is no overhead resistance visible on the price action which can continue to rise for days, weeks, or months as the upside momentum is quite strong. However, the indicators in the below panel have attained its higher range that suggests pausing or sideways action is possible in the near term. Although, the priority must be given to price action which is rising feverishly and ostentatiously.
As I have been writing and keeping a close watch on market breadth or participants for quite some time. I would say, the weak breadth got relieved to some extent this week, but not fully. And this is still a cause of concern for me. Interestingly, at the same time, a significant correction is taking place in a group of stocks stealthily while indices are making new highs. It is of utmost importance to watch out for the component in your portfolio, as there is a high probability you may lose the money in a rising market. Hence, stock selection is the key along with entry and exit discipline. As there is no overhead resistance, it is axiomatic to consider that outlook is proceleusmatic unless we see any sign of technical damage on the chart.
Conclusion
The rally appears to be tantalizing but one should not rush to buy the rising stocks unless you get it at the right entry-level close to the support zone. And stay with only the strong stocks, don’t anticipate the reversal in falling stocks unless there is veritable evidence of that. Moreover, it’s difficult to predict the peak in such a gung-ho market, so always ready with exit discipline.
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Be Patient…; Be a Savvy Investor..!!
Pankaj