Never Give Up Hope even during worst of times if the market is still hanging on. It's never over till it's over.
Let me explain what I mean:
Lots of times we think with our minds filled with fear, hope or greed. We become completely blind to what's happening in front of us. Demonetization was one such phase where people formed extreme opinions on the issue and looked at the market from that prism. Some people turned extremely bearish on everything and yes they must be regretting now
Never stand in front of a moving train because your brain has done some fundamental analysis. Sounds stupid but people do that in market
— Deepak Singh (@smarket) January 14, 2017
It is always easy to look at the event post fact, even then, it's important to look at the event to learn. Let us look at the market behaviour since Nov 08 2016
Narendra Modi shocked the market with demonetization announcement. It did break the market to begin with
Indian stock market: Technically broken. It means it can swing around with no clear direction. It will be tough to spot a clean move for now
— Deepak Singh (@smarket) November 11, 2016
It's never easy to not get carried away by the noise. And that's why to have sanity - one should never lose sight of what market is trying to do. So, while the bearish cacophony continued - Nifty gave first sign of stability when it bounced from the Brexit Lows it formed on Nov 21 2016.
Press hyped demonetization negatives but the market was acting quite differently. There was fear but there was hope too
Demonetization impact on India's economy overhyped...in the end it will turn out to be small blip
— Deepak Singh (@smarket) November 24, 2016
The Big question then: Where is the Support for Nifty?
During times of uncertainty, it's difficult to think rationally. There is always confusion where the support for Nifty it. Honestly, I thought it's down all the way to 200 week ma which at that point was near 7500. 7920 looked very unreal amidst all the bearish cacophony. My view back then
But the market had other plans. The Market started stabilizing above 7920. The panic got arrested
Demonetization is now a month old and Nifty is down 5% during this period and INR has depreciated by 2.3%. That does not sound like panic
— Deepak Singh (@smarket) December 7, 2016
So the market was not panicking but folks at CNBC and Bloomberg Qunit were screaming and spreading panic. Another lesson: Never trust any economist
Always Listen to the market - Look at the Price Action
The Price Action suggested this
Why Nifty will find support around 7930-7980 levels? https://t.co/F5FTci6ptE
— Deepak Singh (@smarket) December 14, 2016
Nifty came down to 7930 and the Bulls started getting hopeful by Dec 25 2016. Buy the dip mentality was pretty active
— Deepak Singh (@smarket) December 25, 2016
The Most compelling Buy signal came on Dec 27 2016 when after a brief scare market made a strong comeback
When a market breaks down near support only to reverse a day later means it was a move only to trap bears
— Deepak Singh (@smarket) December 27, 2016
Just see what Nifty has done since then
I cannot make a stronger case than this on why price action matters.
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— Deepak Singh (@smarket) January 27, 2017
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers