Weekly Market Recap
The bounce off this week was as sharp as the correction occurred last week, however, NIFTY still has to recover few more points to recoup the last week loss. Nevertheless, it was a decent rally NIFTY broke out above the 50-day SMA and closed the week at the high end of the range without having a small pull back.
In the week gone by the benchmark SENSEX surged 1308 points or 3.5% closed at 38697, similarly, NIFTY gained 366 points, or 3.22% and settled at 11417. Interestingly, BANKNIFTY outperformed rest of the market and gained 6%.
Current Outlook
Last week, I wrote that NIFTY had a correction of around 8%, ideally that is supposed to be healthy and took a support precisely at 200-day SMA and I expected NIFTY to hover between 50 and 200 SMA for next few days, however, NIFTY ostensibly and smoothly broke out above the 50-day SMA and created a gap while opened higher and holding the gains on Thursday (see the chart below). Technically, it is important to watch this gap going forward because this gap should act as a strong support, however, falling below the gap would negate the breakout that may lead to further weakness.
The indicator window shows RSI with a potentially bullish configuration. RSI has gone above 50, typically ranges between 40 and 80 indicate the uptrend and it is close to the lower end of the range. In a downtrend, RSI ranges from 60 to 20 with the 50-60 zone representing momentum resistance of sorts. Looks like the 50-day SMA was providing resistance to the RSI as well which is broken incisively.
It appears that NIFTY might have ended this healthy correction this week with a gap and a breakout. We have yet to see follow through because NIFTY may face a stiff overhead resistance at red horizontal line as the same line has acted as major support in February as falling below that produced cascading fall in NIFTY, which means the cup is half full. Nevertheless, the good news is financials have shown a sign of strength which is good for the indices.
Like I said before, the course of direction is changing quite frequently and abruptly from negative to positive, or vice-versa. Post this week action, the benefit of doubt for the outlook goes to bulls unless the gap support and breakout holds.
Conclusion
Although, there is lot to analyse and to talk about, but the prudent way is to wait patiently to get into the trade or make fresh investment. Amid rising complexity with the change in equation, however, the market is providing fair prodigy for the impending direction at least few of times if not always. Hence, be patient and wait for the right entry.
Feedback, comments, suggestion or questions are welcome at below comment section or at [email protected].
Be patient…; Be a Savvy Investor..!!
Pankaj