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When markets remain in the same range for four weeks running, there isn’t much different that one can say about it. We must also avoid over analysis because there will then be a tendency to find factors to fit a certain argument or viewpoint and this can always lead to unwanted complications. Mainly because once the mind has bent to one side, it becomes difficult for the mind to accept information to the contrary.
The Bank Nifty’s performance vis-à-vis the Nifty remained a bit sub-par although no alarm bells of any kind went up. During the week the Nifty began well but swiftly gave up pretenses of wanting to pull into some uptrend by early Tuesday. After that it was left to some end of week rally to restore some sort of respectability. During the rally too the Nifty did slightly better than the bank nifty. Hence, it is evident that the biggest influencer of the market moves—the financials—were subdued.
Chart 1 shows the moves within the week through a 30-minute duration. This time I have shown it with a CPR indicator to highlight the non-trendiness of the market.
The rally at the start of the week ran into some rising resistance lines (using Gann grids) and fizzled out pretty quickly. Breaking the CPR zone lower, the market signalled a possible decline towards the lower grid line of support and this occurred by the end of the week. I had tweeted about this during the week as well. The Friday rally wasn’t entirely unexpected as a four-week range had developed between 17,800 and 18,200 area and there wasn’t any factor to force the Nifty below the supports.
As can be seen in the chart, the CPR for the following week is narrower compared to the earlier week but is placed in the same range around 18050-90. The CPR acts as a magnet creating a reversal to mean type of price action if triggers are absent. So, we will need some definite news triggers for the Nifty to move out of its current ranging. I have mentioned this earlier as well but it bears repeating—be on the back foot in your play until some trend emerges. You really cannot force the market to give you profits. A narrower CPR is easier to surpass and, therefore, after four weeks of ranging, we should probably be on the lookout for some trends to appear in the coming week or two.
So, it would behoove us to look for what can create such a breakout either up or down. First, would be to check status of the financials. Chart 2 shows Bank Nifty weekly. Overlaid on this chart is a close-up of the move in Nifty for comparison.
It can be noted that the Bank Nifty has not really dropped very much but in the same period the Nifty has seen a three red-candle fall. Usually, trends are set off when you have a succession of three candles of a color (like the Three Black Crows pattern) and this signal is not visible on the Bank Nifty (where we have one long body red candle with no follow through to that candle). Now, it is a tossup as to which of the two patterns will prevail. It, therefore, becomes evident that the low on Bank Nifty (at 41,700) is quite critical for sustenance of the uptrend. It can get pierced here and there a bit but we certainly don’t want it to be broken in any decisive manner. That will become the canary in the coalmine.
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Image and article originally from www.bqprime.com. Read the original article here.