Weekly Market Recap

As I wrote last week, the bullish momentum disappeared, and divergence appeared along with the large number of stocks that have exhibited a similar pattern of corrective action that may lead to a sharp pullback in the forthcoming week. This week, the market corrected precisely in line with my analysis and expectation where almost all the major sectors have witnessed a sharp pullback.

In the week gone by the benchmark, SENSEX has lost 1514 points, or 2.49% to settle at below 60K mark at 59306, similarly, NIFTY fell below the 18k mark and shed 443 points, or 2.45% to close at 17671. While BANKNIFTY which appeared to be the silver lining past week got reversed dramatically and lost 3%.

Current Outlook

A few weeks ago, I talked about the deviation in the prices from their moving averages which has acted as a good indicator in presuming that the current up move is being over-stretched, and the price needs to correct to some extent or should remain side-ways for a few weeks before resuming upside. However, after some pause, NIFTY continued to move up ostentatiously since I wrote this, and eventually ended up with a speculative move in the last penultimate week when NIFTY persistently had a gap opening as we can the blue shaded portion in the chart below. Ideally, the speculative move ended up with climactic action which leads to pullback or reaction in opposite direction with the same or larger magnitude as we have seen in the past two weeks. Unless this downside reaction stops it’s difficult to predict how long or deeper it may continue. Once the reaction stops the range-bound condition will develop that confined the prices between high and low of the range for quite some time.

However, technically NIFTY has fallen precisely up to the 50 SMA (green line) and so far, this has been a good support zone in the last two years. Although, the indicators in the below panel suggest that downside momentum has gained strength and all of them falling torrentially. Moreover, on the weekly chart, the picture still looks quite vulnerable and has enough for further correction.

Hence, the outlook is still in the midst of chaos where room for further correction is quite enough.

Conclusion   

Mostly the sharp pullback or major correction comes unheralded, but this time market gave enough warning to exit at optimum level. No matter how strong the market appears we should always be ready with exit discipline as there is no guarantee you may get the second chance to exit in the near term, however, there is a fair probability the price may remain hover far below your breakeven point in your life span or longer than you expect.

Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].

Keep Analysing…; Be a Savvy Investor..!!

Pankaj