Wish You All a Very Happy and Profitable New year
Weekly Market Recap
Bid adieu to 2022. This week brought some relief to the buyer as it ended on a positive note. A decent bounce was witnessed throughout this week though some sharp selling occurred in the final hour on Friday that trimmed down the gains, yet the weekly gain was good.
In the week gone by the benchmark SENSEX gained 995 points, or 1.66% to close above the 60K mark at 60840. Similarly NIFTY regained the 18k mark with the gain of 298 points, or 1.68% settled at 18105. While BANKNIFTY led the advance with a gain of over 3%.
Current Outlook
This week comes to end with the monthly and yearly closing. So, it is important to analyze the charts in a different time frame. The important signal that emerged on the monthly chart is the bearish engulfing candle. History says the cardinal top is being formed at the top of this candle which has resulted in significant correction in the following months as we can see in the monthly chart below.
In the past twenty years, five times this signal has emerged on the NIFTY monthly chart enunciated by blue arrows, and every time it has produced a significant correction in the following months. The major or deep correction occurred in 2008 when NIFTY fell over 60% in the next few months, two times NIFTY corrected up to the 50-month SMA (green line) and one time up to the 21-month EMA (purple line). This suggests that NIFTY has the potential to correct up to 50-month SMA (green line) which is at around 14K currently or at least to 21-month EMA (purple line) which is at 16600.
Hence, it is indispensable to take into consideration the above configuration before we rush to buy in the hope of a new year rally.
Conclusion
However, no indicator is infallible, if NIFTY manages to cross above the recent peak that will negate this bearish setup, but until then it is a strong indication of forthcoming correction. So, be patient and careful, regardless of your inclinations.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at pankaj@savvycapital.co.in.
Be Patient; Be a Savvy Investor..!!
Pankaj