Market is in bounce mode after finding the support near 8100 area. BUT will this bounce hold or fizzle out?
Nifty is back above MA(200), however still below MA(100) hence be cautious. McClellan index is almost flat, however take a closer look and a slight upward movement can be noticed. Over all the chart continues to suggest being cautious.
Daily Nifty chart clearly shows that market has to overcome MA(50) resistance and than the upper trend line resistance. Expect zig-zag action here. If we start seeing top tails on daily bars for few more days then market is certainly headed further down.
Weekly chart is giving us a subtle clues about a pattern called Head-Shoulder pattern. We can see the left shoulder formed in Oct-Jan time frame and a huge head formed in Jan-Apr time frame.
To complete the pattern we shall see another shoulder formation which is in process as we type this. It would mean that the bounce may get extended to 8500 area and then drop back to 8100 area. Eventually the neck line will be broken and market will experience a painful downward move towards 7200 area causing panic.. Lets wait n watch as the drama unfolds in next 5-6 months.
Weekly chart is silently telling us what to expect in next couple of months. If the pattern mentioned above does really work out then we shall panic selling in coming months. BUT remember, that will be our opportunity to BUY for the next amazing BULL market which will start after that panic sell-off. Will you be ready to take this roller coaster ride!!!
What does it mean for our Investments?
Don't get fooled by the bounce, market is in correction...
What does it mean for our Investments?
- Mutual Funds - If still invested in equities then this is your last chance to get out else stay invested and ride the correction which could take a while, be patient. But it would be wise to STOP SIP for now until market stabilizes. If in cash/FDs/liquid funds then wait for next robust opportunity, NO need to hurry.
- Stocks - ONLY invest in strong patterns with good earnings guidance and DO NOT forget to have STOP LIMIT on open positions. When market is in correction, it will drag everything down with it. Check out our trade size calculator to manage your risk along with potential buy candidates watch list.
Don't get fooled by the bounce, market is in correction...