Weekly Market Recap
The tussle between demand and supply continues having supply being active and dominating at higher level. This week action was in line with previous week where buyers seem to be gung-ho under 15K on NIFTY, while seller seems to be more dominating at higher level, consequently, this has been a sideways week for the NIFTY with mild gain.
In the week gone by the benchmark Sensex gained 386 points, or .77% to settle at 50792, similarly, NIFTY added 92 points, or .62% to close at 15030.
Current Outlook
The dominant feature on the daily chart is the consolidation or the sideways action. In February, the NIFTY made a high of 15431 and low of 14467, since then it has been hovering in that range. I would say, this is the best possible outcome in order to maintain and digest the massive gain of last few months. The technical indicators in the lower panel which had been over-stretched for quite some time is getting flattish and gradually rolling downward that indicates strenuous upside momentum is getting weaker. As we can see in the chart below, the RSI is flattening at the centre which suggest NIFTY is in resting position, as long as it stays above 40 and below 60, sideways action shall continue. This is the best-case scenario for the NIFTY to consolidate or remain sideways for next few weeks to gather some fuel for the impending upside breakout.
While, on the below weekly chart, the divergences have not been relieved completely and things look far over-stretched. The indicators have started rolling down, indicates fading upside momentum is quite evident. The combining effect of negative divergences and deteriorating momentum suggest the pull back of some magnitude is quite possible. The recent February low could be the first target or further correction till January low cannot be completely ruled out. In nature things move calmly in the home and move violently into the home. NIFTY is clearly out of the trading channel or home (blue parallel lines) that suggest violated moves will continue unless it stabilized in that range.
Conclusion
The combined applied analysis on the daily and weekly charts infers that sideways action with slight negative biased may continue for a while. In the meantime, the individual stocks who are trading at major support level and within their uptrend can be consider for buying but with tight stop. Or, we can wait patiently unless market relieved some of its over-stretched position as apparent on weekly charts.
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Be Patient…; Be a Savvy Investor..!!
Pankaj