Weekly Market Recap
Finally, the winning streak of seven consecutive weeks comes to an end this week. As we have experienced such a fascinating rally in the past few days; perhaps beyond our expectations took a pause this week and gave an impression to correct further, if not deeper.
In the week gone by the benchmark SENSEX shed 686 points, or 1.09% to settle at 62181, similarly, NIFTY corrected by 199 points, or 1.07% to close at 18496. While BANKNIFTY continued to rise with a gain of 1.23%.
Current Outlook
“All large Losses begin as small losses”
Until last week, NIFTY has risen lopsided with the vertical gain that is high time when we should wait patiently. As I mentioned in my last weekly note that ideally, vertical gains are hard to sustain unless there is a large base. The deviation of the price from the moving averages eventually leads the price to move towards moving averages violently; that’s why the price corrected sharply. This week NIFTY corrected precisely up to the 21-day EMA as expected and at the same time corrected the recent vertical gain.
For the past few days, I have been emphasizing and vigilant on market breadth as I mentioned it is not as strong as it should have been in a bull market, and we should wait patiently for a decent entry. Whenever the market rises or falls, we expect more as human nature is driven by greed and fear and ignores to act rationally, especially in the stock market. In the last year, NIFTY has risen and corrected sharply we can say this has been the trend of the market so far.
Last week, the technical indicators preceded the price and began to roll down as a result NIFTY has corrected decently from its recent high on the daily chart. However, on weekly and monthly time frames NIFTY appears to be quite vulnerable and may correct deeper, still, we can expect NIFTY to take support at Friday’s low. Failing to do so may invite fresh selling.
Conclusion
In bull market phases, charts tend to break out and keep going higher. In bear market phases, charts will often experience “false breakouts” where the price moves above resistance and then quickly reverts back lower. Perhaps we are seeing much more of the latter or difficult to say at this juncture. We should dig a little more into the end of December by looking at the final bar then we can be much more prepared for potential outcomes, till then be patient.
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Be Patient; Be a Savvy Investor..!!
Pankaj