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 remains above 1.0700 amid expectations of Fed refraining from further rate hikes
EUR/USD continues to gain ground on Thursday as the prevailing positive sentiment in the market provides support for risk-sensitive currencies like the Euro. This improved risk appetite could be attributed to dovish remarks from Federal Reserve Chairman Jerome Powell on Wednesday.
GBP/USD gains traction above 1.2500, Fed keeps rates steady
GBP/USD gains traction near 1.2535 during the early Thursday. The uptick of the major pair is supported by the sharp decline of the US Dollar after the US Federal Reserve left its interest rate unchanged.
Japanese Yen bounces off daily low, keeps the red around mid-155.00s against USD
The Japanese Yen rallied on Wednesday amid speculations of another intervention by authorities. The momentum, however, runs out of steam on the back of the divergent BoJ-Fed policy outlooks. Traders now look to the second-tier US data for some impetus ahead of the NFP report on Friday.
Editors’ Picks
EUR/USD remains above 1.0700 amid expectations of Fed refraining from further rate hikes
EUR/USD continues to gain ground on Thursday as the prevailing positive sentiment in the market provides support for risk-sensitive currencies like the Euro. This improved risk appetite could be attributed to dovish remarks from Federal Reserve Chairman Jerome Powell on Wednesday.
GBP/USD gains traction above 1.2500, Fed keeps rates steady
GBP/USD gains traction near 1.2535 during the early Thursday. The uptick of the major pair is supported by the sharp decline of the US Dollar after the US Federal Reserve left its interest rate unchanged.
Gold needs to reclaim $2,340 for a sustained recovery
Gold price is consolidating Wednesday’s rebound in Asian trading on Thursday, as buyers await more employment and wage inflation data from the United States for fresh trading impetus. Traders also digest the US Federal Reserve interest rate decision and Chair Jerome Powell's words delivered late Wednesday.
Top 3 Price Prediction BTC, ETH, XRP: Altcoins to pump once BTC bottoms out, slow grind up for now
Bitcoin reclaiming above $59,200 would hint that BTC has already bottomed out, setting the tone for a run north. Ethereum holding above $2,900 keeps a bullish reversal pattern viable despite falling momentum. Ripple coils up for a move north as XRP bulls defend $0.5000.
Fed meeting: The hawkish pivot that never was, and the massive surge in the Yen
The Fed’s latest meeting is over, and the tone was more dovish than expected, but that is because the rate hike hype in the US was over-egged, and rate cut hopes had been pared back too far in recent weeks.
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