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Investors Are Advised Caution As Bears Take Control

On Friday, the NIFTY made a consecutive lower high, following 15th November’s unsuccessful attempt at breaching the critical 20 day moving average mark.

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The bellwether index struggled last week as concerns about a potential tapering by the US fed fuelled fears of the liquidity fuelled rally hitting a wall in the near term.

On Friday, the NIFTY made a consecutive lower high, following 15th November’s unsuccessful attempt at breaching the critical 20 day moving average mark.

To a large extent, this correction was expected and anticipated, as roughly 1500-2000 points of “froth” had built up in the NIFTY, with stock prices rallying well ahead of fair valuations even when considering aggressive growth estimates.

Now, with fresh fears arising around the OMICRON strain of COVID and it’s impact on the burgeoning global recovery, traders appear to have become risk averse all of a sudden. Even intra day rallies are being used as selling opportunities.

With the index now hovering around the strong support 20 week moving average mark, we may see a tussle ensuing between the bulls and bears this week. A decisive crack below 17K will most likely see the index falling heavily before finding support around the 16K mark, which marks the lower Bollinger Band on the weekly charts.

The long-term story remains positive, but investors are advised caution. Do not be in a hurry to go “all in” just because the index has already corrected more than 1500 points from its heady highs. There may very well be more drama in store as 2021 comes to a close. Making steady, staggered investments into equities in a disciplined manner (starting right away), rather than attempting to time the market, will stand investors in good stead.

DISCLAIMER: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. If you do not fully understand these risks, you must seek independent advice from your financial advisor. All trading strategies are used at your own risk.


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