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 treads water around 1.1900
EUR/USD edges a tad lower around the 1.1900 area, coming under mild pressure despite the US Dollar keeps the offered stance on turnaround Tuesday. On the US data front, December Retail Sales fell short of expectations, while the ADP four week average printed at 6.5K.
GBP/USD looks weak near 1.3670
GBP/USD trades on the back foot around the 1.3670 region on Tuesday. Cable’s modest retracement also comes in tandem with the decent decline in the Greenback. Moving forward, the US NFP and CPI data in combination with key UK releases should kee the quid under scrutiny in the next few days.
USD/JPY drops toward 155.00 as focus shifts to US data
USD/JPY meets fresh supply and inches closer toward 155.00 in the Asian session on Tuesday. The Japanese Yen holds the upper hand over the US Dollar after Japanese Prime Minister Sanae Takaichi led the ruling Liberal Democratic Party to a historic landslide win and on intervention talks. Traders brace for key US economic data that could offer more clues on the Federal Reserve's monetary policy.
Editors’ Picks
EUR/USD treads water around 1.1900
EUR/USD edges a tad lower around the 1.1900 area, coming under mild pressure despite the US Dollar keeps the offered stance on turnaround Tuesday. On the US data front, December Retail Sales fell short of expectations, while the ADP four week average printed at 6.5K.
GBP/USD looks weak near 1.3670
GBP/USD trades on the back foot around the 1.3670 region on Tuesday. Cable’s modest retracement also comes in tandem with the decent decline in the Greenback. Moving forward, the US NFP and CPI data in combination with key UK releases should kee the quid under scrutiny in the next few days.
Gold the battle of wills continues with bulls not ready to give up
Gold comes under marked selling pressure on Tuesday, giving back part of its recent two day advance and threatening to challenge the key $5,000 mark per troy ounce. The yellow metal’s correction follows a better tone in the risk complex, a lower Greenback and shrinking US Treasuty yields.
AI Crypto Update: BankrCoin, Pippin surge as sector market cap steadies above $12B
The Artificial Intelligence (AI) segment is largely on the back foot with major coins such as Bittensor (TAO) and Internet Computer (ICP) extending losses amid a sticky risk-off sentiment.
Dollar drops and stocks rally: The week of reckoning for US economic data
Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.
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