Weekly Market Recap
Precisely in line with my expectation and analysis market plunged vehemently on Monday and made a significant low. However, the rest of the week was spent to recoup the losses and somehow major indices managed to recover all the losses which is quite remarkable.
In the week gone by the benchmark, SENSEX had a rollercoaster ride of over 2000 points and ended with a mild gain of .2% or 112 points, similarly, NIFTY had a wide range of over 700 points before closing almost flat with a gain of .11% or 18 points to reclaim the 17K mark. While BANKNIFTY couldn’t recover and lost over 2%.
Current Outlook
NIFTY off its lows in a dramatic fashion and looks like the solid recovery may sustain, but to me, it seems to be a relief rally that happened after the shake-out session, predominantly that has been the case so far. Technically, the current configuration on the NIFTY is the falling channel as enunciated in the chart below. We have seen the same shake-out pattern in the recent past (annotated with blue arrows) when NIFTY fell below the lower line of the falling channel, consequently recovered sharply to reach the top of the channel. The same pattern seems to be forming this time. Though it looks like there is room to rally further till the top of the channel, however, indicators in the lower panel suggest otherwise. As I wrote, last week the indicators range in the downtrend is from low to mid-level, in contrast, mid to high in an uptrend. After reaching the lower end of the range on Monday, they have bounced till the middle and now again seem to be rolling downward.
However, NIFTY is precisely at the middle of the channel which may move either side, still biased to downward. While financials couldn’t manage to recover and remained under the grip of bears. In addition, the market breadth which regained some strength during the rally again appeared to be debilitated on Friday. And the VIX after having a surge, eased off significantly which can further escalate the fall.
Hence, at best NIFTY may move to the top of the channel, failing to do so may invite the sharp fall to the lower level. It is axiomatic to say that at present outlook is not favoring the bulls.
Conclusion
On the surface, most of the time things seem very bullish, but the stock market truth doesn’t always lie on the surface, it’s beneath the surface. As technicians, we need to learn to dig deeper. as that’s where the problems can reside. And, in my opinion, we have an issue that needs to be resolved quickly until that we should wait patiently, or sell on rise may fetch a good return.
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Be Patient; Be a Savvy Investor..!!
Pankaj