February 20, 2017

Neowave analysis of markets

The 2 consecutive Doji candles on weekly chart suggested continuing struggle between Bulls and Bears. In the meanwhile, the broader market continued to under-perform. While the IT/Pharma/Bank sectors gained 1-1.5%, the Realty/Auto/PSUs/Capital Good sectors lost 1-3% each. Stock-wise profit-booking continued for the 2nd consecutive week. For every advancing stock, there were more than 2 declining 




However, inside the “Struggle Zone” of last 2 weeks, Index also added “Sell on Rallies” to its characterExcept for Thursday of last week, all the remaining Daily candles were Bear candles, which formed due to selling at higher levels. 



By definition, a Bear candle forms whenever action opens higher, but unable to hold the higher level, it ends below Open due to profit-booking. Remember, even in the previous week, except for Monday, all Daily candles were Bear candles.

The “sell on rallies” has resulted in deteriorating spread. The A/D ratio has been -ve on most days during the last 2 weeks. This ratio attempted to turn +ve last Thursday, but the same turned -ve again on the very next day. Despite the overall UP-trend, we require sustained rallies supported by +ve spread for Index to finally break out of the “Struggle Zone”. 

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Due to heavy profit-booking, Friday’s high of 28726 (Nifty 8896) would be an important upside. 

No further upside can open until Index takes out this high decisively, preferably with an improved spread

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We, however, still consider post-Dec’16 rally as a new up-move, targeting new highs for the Index. The question is whether the “struggle” would continue until the State Election results coming out in the 2nd week of March’17.

The bottoms of last 2 weekly Long Legged Dojis are similar, at 28102-149 (Nifty 8712-15). Consider this as a crucial area on downside
 for the time being.

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