Daily Market Review
Market Pulse : Rally Attempt
Nifty opened with a gap down of 70 points. It consolidated a bit before succumbing to selling pressure. It shed around 250 points to end near the day’s low of 11,813. In the process, it breached its key support of the 100-DMA. Currently, it is trading 2.5% and 1% below its 50- DMA and 100-DMA, respectively. It is crucial for Nifty to not breach its 200-DMA (11,682). All Nifty50 stocks ended in the red.
Weekly Action
Nifty, -0.3%; Sensex, -0.2%; Nifty Midcap, -0.2%; Nifty Smallcap, +0.04%; and Model Portfolio, +1.7%.
Market Pulse Rally Attempt
Weekly Market Review
After closing below 50-DMA last Friday, Nifty started the week on a weaker note. It was volatile through the week. Today, it tested its 50-DMA (12,148) but couldn’t close above it. Also, the broader market was weak. Nifty Midcap and Smallcap bounced back from their 50-DMA.
“For the best prospects, do a price and volume check of each week within the stock’s base to help you conclude if the stock is showing sound accumulation or too many price and volume defects. Next, do a fundamental analysis checking for excellent earnings, sales and return on equity..” – William J. O’Neil, MarketSmith Founder
In technical analysis, the process of identifying supply and demand in a stock starts with analyzing price and volume on the daily and weekly charts.
Are up days or weeks accompanied by heavy volume? Does the stock close in the upper half of the trading range, either on the daily chart or the weekly one? And on the down days, are they trading on light volume? If a stock falls on heavy volume, does it close in the upper half of the trading range? Answers to such questions in the affirmative strengthen the overall quality of a base pattern.
However, in some cases, the stock price might be volatile as the base takes shape, resulting in a “wide and loose” pattern. There might be a lot of institutional selling, in the form of distribution days or weeks, in the base. Both are negative and can keep a lid on a stock’s breakout.
Continue reading “Beware of Distribution: Too Much of it in a Base Can Play Spoilsport”
