Market Technicals And A Tribute To Busybee
Continue with the same approach advocated for the past several weeks – buy current and add more on dips, writes CK Narayan.
And for this week... some notes and observations from the market – all my own work, as the legendary Busybee used to say.
Oh, I realise that many people of today may not recognise who Busybee was. Yes, it is the pen name of journalist and humorist Behram Contractor whose articles had regaled us all, back in the 1980s all the way till his death in 2001. Many consider him to be the Indian Art Buchwald. Now don’t ask me who that was!
Like, the market notched up another new high and made it the tenth week on a trot. And the people were all happy.
Like, the Bank Nifty too was up, tagging along with the Nifty, now also for the tenth week on a trot. Although it didn’t seem like it was keeping pace with the Nifty, people were all happy.
Like, the Midcap and Smallcap indices too were up on trot for the past 10 weeks and I too did not know until now as I looked at the data for this article. But I too was happy because it meant that my portfolio should have improved some. After all, like many of us, I too was afraid to look at the state of our portfolios for fear that as soon as we do that, it may start going down. I am not kidding, people do think like this – starting with my brother. I think they are trying to create their own serendipity, like waking up one day and finding that there is a Wipro in their portfolio since 1980 or something! Since most of us did not put it in there, the only way such things can happen to all of us is thru some dementia-stricken old coot of a relative! The reason I am using Wipro as an example because it is the most famous WhatsApp-forwarded-billionaire-builder. In between, MRF tried to get into the fray but somehow got the boot from the people!
Like, I am finding all the weekly candles are small-range affairs except for the trend launching candle at the start of November. Here, take a look at the chart on this aspect.
Now you may be wondering what the big deal about that is? Well, it is like this. As markets go higher and higher, there comes a time when distribution begins. When that starts, you start seeing larger ranges and bearish long bodies alternating with bullish small bodies. The complete absence of bearish long body candles in this rise from Nov. 20—and indeed, right from the bottom in March—is, therefore, something of a mystery. The only conclusion that emerges from this finding is that distribution has not yet commenced!
Like, then this is a powerful finding because it says that the market can continue to rise. Gasp, gasp, will go many of those I-shall-buy-on-a-reaction types. Oh, No! will be the moan from the market-is-too-stretched brigade.
Like, we can’t really feel much sympathy for these two gangs. After all, they have persisted with their view all thru the rise. We tried to tell them different but sometimes, you get so wedded to your view that you cannot see different. Until it becomes far too late. Then you justify remaining in that position by saying something equally inane like, ‘Abhi kahan khareedenge!’ Well, wake up guys. It may not yet be too late – those are just some emotional excuses to hide. The real thing is your fear and the only solution is to overcome that fear.
Like, this reminds me of a saying of Sadguru. He said, “out of fear of death, many people simply forget to live.” Profound, huh? Applies well to the markets – out of fear of losses, many people are unable to take trades. If you are a serious player in the market then you have no choice but to participate. I wrote just about the same thing about four weeks ago, quoting Tennyson in the ‘Charge of the light brigade ‘. Was anyone listening? I would doubt. Most people are happier living with their fears rather than take action against them.
Like, when I looked at the rest of the indices, I am actually finding that there are many showing a fresh upside breakout happening in the last week! See the chart here.
Since this kind of pattern is visible across several sectors (like auto, metals, infra, media, etc.) it would then mean the breadth is actually widening. This finding would reinforce the view that there are more gains ahead! More Gasp-Gasp and Oh, Nos! from the brigade!
Like, this means we have to continue with the same approach that I have been advocating for the past several weeks – buy current and add more on dips. So, the only job you really have is to define the supports. Trendlines, moving-averages, super-trends, parabolic stop and reverse, average true range bands, etc., etc. Whatever floats your boat.
Like, everyone wants a target, to feel comfortable with the possibility of a purchase, and here is my guess for the coming week. The projection of the swings gives us a target zone at 16,450. The stop would now move to 14,250. For a while, the stop level is a buy-the-dip level too.
Like, finally, I get a chance to pay a humble tribute to Busybee, a journalist legend of India!
CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise and NeoTrader; and chief investment officer of Plus Delta Portfolios.
The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.