Weekly Market Recap
It was a turbulent week for the market as on Monday stocks started off on a strong note and posted a solid one-day gain followed by a sharp reversal on Tuesday and the market continued to drift lower for the rest of the week. However, the recent low support was held very well, and a decent recovery came in in the final hours on Friday.
In the week gone by the benchmark SENSEX 360 points, or .60%, and closed above the 60K mark at 60261, similarly, NIFTY gained 97 points, or .54% to close at 17956. While the IT index bounced off sharply with a gain of 3.5%.
Current Outlook
The silver lining and the dominant feature on the chart is the double-bottom or triple-bottom support as we can see on the chart below. Friday’s price action has demonstrated the importance of that support level. The more times the price test a particular level, the more significant it becomes. And the NIFTY held that level since mid-December which has enhanced the validity of that support.
As I wrote last week, the one important characteristic of this correction is that selling is being refrained at a lower level and becomes active at a higher level which makes a classic sell on the rising market. However, since the support is being respected, we need to see how the NIFTY reacts at the first resistance level which is supposed to be at 21-day EMA (purple line) and 50-day SMA (green line). At present, NIFTY is appearing to be well poised to advance further as the support held into the earning season suggests better results going forward.
Conclusion
Hence, at present we have a mild bullish scenario, so we should be positioned for the most probable scenario but must plan for alternative scenarios. Market history is filled with events where multiple support and resistance have been broken decisively, therefore, we should be well prepared to combat this reality.
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Be Disciplined; Be a Savvy Investor..!!
Pankaj