Brandon Wendell, CMT
Brandon Wendell
With the Sensex breaking 20000 and the Nifty making significant highs, many investors are wondering if the markets will be able to take out the previous highs. Investors are eagerly awaiting the budget to see if the markets will indeed continue their bullish run after the recent basing.
The best thing we can do as traders is to look to the charts for the actual clues to the market direction. Looking first to the Nifty, we can see that price has been trading right into a supply zone. With the slow entry into that zone, you would expect that if we do drop from the zone, it would only be a correction and not a trend reversal. A healthy correction to the 5650 demand is likely and also confirmed by negative divergence on the RSI. As long as we do not have the RSI drop below 40 when we correct, we should see new highs afterward. This was confirmation of bullish trend continuing as the corrections indicated in June, July, Sept, and Nov. 2012.
The Sensex is also into supply with a slow approach. I would have expected a sharp declining only if we approached the supply quickly. As of now, I am only seeing a pullback likely to the 18500 levels.
Those of you who have been in my Professional Trader class or in the Extended Learning Track course know that I like to look at the sectors that are fueling the markets in order to determine whether the markets are likely to continue their trends. I looked back on the equity index charts to see where the current bullish move began. I started my study from the June 4th 2012 lows. When I compare the sectors from the start of the bullish run, I see that the move was one that was participated in by all of the sectors and was healthy. The strongest sector was the media.
As the equity markets were nearing the recent supply levels, all of the sectors were moving lower except for FMCG. This shows nervousness in investor sentiment as they shift funds into safer sectors. If we do not see a large drop in cyclical stock investments (autos, IT, durables etc) then we should only see a pullback in the indexes.
Intraday traders should look at profiting from the short side of the market as the daily charts will be leaning toward short-term downtrends. But once those demand zones are reached, look for the long opportunities to test the prior highs.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD leaves the door open to a decline to 1.0600
A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.
GBP/USD stays firm amid BoE, Fed commentary and US data
GBP/USD edges lower in the second half of the day and trades at around 1.2450. Better-than-expected Jobless Claims and Philadelphia Fed Manufacturing Index data from the US provides a support to the USD and forces the pair to stay on the back foot.
USD/JPY rebounds from 154.00 as investors digest fears of Japan’s intervention
USD/JPY finds buying interest near 154.00 as investors see Japan’s intervention mere a temporary solution to support weak Japanese Yen. Japan’s National CPI data will impact market expectations for BoJ’s rate hikes. The US Dollar corrects despite the Fed is expected to keep interest rates higher for a longer period.
Editors’ Picks
AUD/USD risks a deeper drop in the short term
AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.
EUR/USD leaves the door open to a decline to 1.0600
A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving
Bitcoin (BTC) price is borderline strong and weak with the brunt of the weakness being felt by altcoins. Regarding strength, it continues to close above the $60,000 threshold for seven weeks in a row.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.
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