Wednesday, March 12, 2014

Nifty chart: a mid-week update (Mar 12 ‘14)


After last week’s fireworks when Nifty broke out on strong volumes above its rectangle consolidation zone of the past 5 months, it has been a time of consolidation in a narrow range. Can there be a pullback down to the top of the rectangle?

Daily technical indicators are inside their respective overbought zones, but showing some signs of a correction. A drop towards the rectangle is a possibility. If it does occur, it will be an adding opportunity.

DIIs have significantly stepped up their selling, and almost matched FII buying this week. That has kept the index from moving higher. Once the selling gets fully absorbed, Nifty should resume its up move.

Sector rotation is visible, but small investors should refrain from moving in and out of different sectors in a bid to maximise returns. More often than not it leads to losses.

Also, going short in anticipation of a big correction is very risky. Going short pays off during a bear phase, because risks are lower. In a bull phase, stay invested and let your portfolio grow.

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