Weekly Market Recap
The market has had quite a week. It looks like a lot has happened during the week, but nothing happened decisively on a weekly basis as the indices closed almost flat after having a roller-coaster ride. The show-stopper was the BANKNIFTY where major action was being seen, which went up invigoratingly till Thursday and fell strenuously on Friday.
In the week gone by the benchmark, SENSEX closed almost flat with the marginal loss of only 58 points, at 61054 and NIFTY remained flat, adding merely 4 points to close at 18069. While BANKNIFTY turned out sharply with a loss of 572 points, or 1.32% at 42661.
Current Outlook
Post this week’s action the question arises, Whether the market is still resilient, or the reversal point has arrived. Well, one thing is quite apparent the NIFTY has entered into the supply zone where the sellers were waiting patiently to offload their holdings. Thursday’s high may act as a strong overhead resistance for the NIFTY, unless it surpasses that level it’s difficult to rise further.
Since the lopsided rally took off at the March end, the major contribution came in from financials as the BANKNIFTY reached the vicinity of its previous high on Thursday, however, it appeared that banks were imploding on Friday. I think the possibility of double-top formation is happening on the BANKNIFTY. And the classic head-and-shoulder pattern is forming on both NIFTY and SENSEX on the weekly chart (see the chart below) which suggests the market is at the edge of the cliff. If that configuration confirms, we may see a sharp reversal, but we need to wait patiently for the confirmation.
Moreover, the IT stocks have been trying to find the bottom, since the torrential fall occurred among their stock price post their earnings and shortfall in future guidance. Therefore, much depends on financials unless there is a change of leadership from financials to IT stocks.
Conclusion
We have seen a lopsided more than 1000 points rally in NIFTY in one month, in my viewpoint – it is scary and not sustainable. Now, the recent action is suggesting that something is amiss and about to fall sharply. Will it happen in May or June? Or will it take until October? I don’t know, but I don’t see this working out ‘perfectly’ as we try to go to take out the previous highs. Hence, we should be cautious.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Be Patient; Be a Savvy Investor..!!
Pankaj