Focus on what the market is doing right now and not what it should be doing.
To understand where the market is going, it's important to understand where it has come from.
There was extreme pessimism in December 2016 because of Trump and Demonetization. Nifty offered an attractive opportunity around Dec 25
— Deepak Singh (@smarket) December 25, 2016
Thanks to strong flows and a strong rally in Emerging markets - the opportunity resulted in a good move. Nifty has rallied 13% in less than 2 months.
But what's the issue now - The Ceiling at 9000 levels
Nifty has not crossed this level for 2 years now.
When Modi became PM - Nifty broke out a long held resistance of 6360 and rallied all the way to 900 by Jan 2015. Now 2 years have passed and Nifty has created a big resistance around 9000 area. It's a way of market taking a pause and letting fundamentals and earnings catch up with price move
WHAT'S THE ROAD AHEAD
Nifty is still buy on dips market. In Bull markets - resistance is a small roadblock. The big question: Will Nifty breakout? Well, I have no idea except this...Usually, in Bull Market, resistances do not stand forever and give way to buying. Now here are two reasons why one can be optimistic that Nifty will breakout 9000 sooner than later.
Inverted Head and Shoulder pattern: Bullish Formation
Nifty has formed this pattern as shown in the chart below. It's extremely bullish pattern and breakout above 9000 means Nifty can rally another 2000 points
Just when Nifty is at 9000 - Reliance has broken out which is a clear indication of which way market can move.
A mega breakout in Reliance after 9 years....Reliance all set to rally another 50-100% over next 2 years
— Deepak Singh (@smarket) February 22, 2017
Now remember, in market - nothing is certain. Let Nifty first breakout above 9000 and if that happens - one can be reasonably confident of bumper gains in large caps thereafter. As of now - market has not shown any evidence to be bearish but as always keep a close eye on everything. I am a price watcher and this is what market seems to be saying right now.
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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