Does “Technical Analysis” work?
Does “Technical Analysis” work in real world? Can we identify the turning points in market?
I take this as an opportunity on behalf of all Technical Analysts who are working in this field religiously, not just as a profession but as a Passion.
Before Sep 2019, I was one amongst those who were expecting the Global Equity markets to fall heavily. In Oct 2019, I did change my view for short term as liquidity started chasing Equity markets across globe.
On 9th Oct 2019, I did recommend to go long in NIFTY 50 and BANKNIFTY based on Domestic cues which were tying back with Global cues as well. I did forecast that U.S and China will enter into a trade agreement which will be a positive for Equity Market in short term.
Although I was expecting this liquidity driven rally in Equity market to continue till Feb-Mar 2020, but got sign of reversals in both Domestic (NIFTY 50, BANKNIFTY, etc) and Global (DOWJONES, NIKKEI, DAX etc) equity markets in Jan 2020 itself.
Below is a snap shot of identifying few major turning points in past months:
NIFTY 50
DOWJONES INDUSTRIAL AVERAGE
BANKNIFTY
NIFTY IT
Few days back when others were thinking to hide in IT stocks, I did recommend to exit/short the same around 16600-16700 levels with a target of 15000 odd levels.
I was bullish on Gold from Dec 2018 when it was trading around $1250/ounce and my view is bearish on Brent Crude around $65/barrel from Jan 2020.
Below is the snap shot of what I mentioned in my past few monthly articles:
In my “Market View_Nov 2019” article I did mentioned –
Here I would like to convey that long term fundamentals yet have not turn positive neither in India nor at Global level but in short run (for next 3-6 months) I expect rally in risky asset classes.
https://www.dhirubhai.net/pulse/market-view-nov-19-puneet-rathi
In my “Market View_Dec 2019” article I did mentioned –
Indian market is rising on expectations that the reforms made by government will help in reviving the growth. Across globe Traders which were sitting on sidelines due to lack of clarity on US-China trade deal and Brexit, now after the announcement they have reentered in risky asset classes. Liquidity is chasing the same selective stocks not only in India but across Globe as expectations are that at least these companies will carry on their outperformance over other companies.
As correctly quoted by Mark Minervini, “If you act in sync with the market, trading can make you rich. If you choose to argue with the market, it will surely make you poor”. This is not fundamental rally but a liquidity driven rally on assumptions that fundamental might turn in coming quarters in Indian economy, now if you believe in long term fundamental to get turn from these levels, you should identify the undervalued stocks and stick to them although they might not perform immediately and make you frustrated. But if you want to enjoy the current rally you have to be in the same stock which have been performing as money is flowing in the same stocks irrespective of sky valuations. Else don’t look into this market which I believe you won’t be able to do as if you are reading to this article you are searching for opportunities in this market.
https://www.dhirubhai.net/pulse/market-view-dec-19-charging-bull-puneet-rathi
In my “Market View_Jan 2020” article I did mentioned –
On Global front Dow Jones Industrial Average is highly overbought, NIKKEI 225 is facing resistance at level of 24500 as economy is contracting signal by BOJ governor, Crude and Base Metals showing weakness, Gold/Silver showing strength even after US-China trade deal and US-Iran clashes subsiding.
On Domestic front I believe now liquidity alone can’t take Nifty 50 or Nifty Midcap higher from these levels, now we need some number/evidence showing actual change in fundamental front as well. Let`s see, will this Union Budget 2020 make or break…. as RBI is likely to hold its Monetary policy on Feb 6 due to higher Inflation level and Governor had already indicated that “Monetary policy has its limit and the Indian government will have to use fiscal measures and structural reforms to revive demand and support the sagging economy”. Although I don’t see government having any room to give positive surprises but at the same time there should not be any negative surprises.
Brent Crude saw a sharp upward movement with US-Iran clashes but returned sharply with same pace from strong resistance of $72.5/barrel and now trading around 60 level. As now Saudi Aramco IPO is gone and Global economies are struggling with growth revival, I don’t see any strength in Crude prices for near term.
Nifty Midcap 50 as forecasted in the last month article, once its crosses level of 4750, will rally. In this month it has already outperformed frontline Indices, now I believe it might face resistance at 5100 before budget.
Nifty Auto is struggling at a major resistance of 8500, Even if it is able to cross this level it will find an immediate resistance at 9000-9500 levels.
Nifty Realty, a star performing Index has witnessed monster rally, almost 37.50% movement in last 4 months. Although in short-term I believe it would be difficult for it to stay above 330 levels, a sharp correction is likely to happen.
Nifty Metals, was unable to hold above the resistance of 2850 on global back drop, even if it resumes its uptrend, likely to face multiple resistance till 3200 level.
https://www.dhirubhai.net/pulse/market-view-jan-2020-union-budget-make-break-puneet-rathi
In my “Market View_Feb 2020” article I did mentioned –
Global Equity market and Brent Crude are falling, Gold and Silver price are flying, U.S treasury yields reached to their lowest level since 2016, as coronavirus cases spread outside China, darkening the outlook for world growth. According to Reuters tally, the virus has now killed more than 2500 people in China and has spread to 28 countries and territories around the world.
Along with Coronavirus fear, Indian equity market was disappointed by Budget due to which NIFTY 50 Index failed to hold the strong support of 11700-11800. Now the recent uptrend which started from Sep19 had been halted, it will be difficult for market to hold the levels above 12200 (I forecasted the same on 20th Feb 2020 at level of 12100, to read, go at the bottom and click on Post 2). I believe Nifty 50 is likely to re-test the recent low of 11600 made on Budget day and if Domestic and Global sentiments will keep on deteriorating, we might see level of 11100 as well.
NIFTY IT Index is flirting around 16500 levels from last few weeks but is unable to hold above these levels. As suggested last month I am expecting a big move from here and which now seems to be downward. Level below 16300 will act as a confirmation for medium term target of 15000, uptrend can resume above 16750 only.
Last month I forecasted Dow Jones Industrial Average to correct from 29350 levels (I forecasted the same on 21st Jan 2020, to read, go at the bottom and click on Post 3), post which it got corrected by 4% to 28170 levels before bouncing back to new highs and is likely to fall again. This time we will see levels of 27000-27500 in short-term.
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Wealth Management | Investment Banking
4 年Thanks for your views!! And great analysis ????
Realtor & Real Estate Investor/ Global Sourcing Leader
4 年Great job Puneet. It proves how much grasp you have in understanding the stock market. Kudos to you