At 8:00 am IST, the SGX Nifty Futures was trading at 10,175, compared with Nifty’s close of 10,305 yesterday.
Market status: Confirmed Uptrend
Global stock markets: Dow 30, -2.7%; S&P 500, -2.6%; Nasdaq, -2.2%; KOSPI, -1.7%; Nikkei, -1.4%; Hang Seng, -0.5%; Shanghai Composite, +0.3%.
Nifty continued to march higher yesterday morning. However, it pulled back sharply in the second half to close at the lows of the day. Nifty registered a distribution day as volume was higher compared with the previous session. On the way higher, the index found resistance near its 200-EMA. Nifty is still trading ~3% and 8% above its 21- and 50-DMA, respectively.
On the sectoral front, barring FMCG, all other sectoral indices closed in the red. Selling was clustered in Bank and Financial Services stocks. Nifty Bank closed 4% lower. Nifty Metal, Pharma, and Realty closed with a cut of 2–3%. Market breadth remained weak. Of 2,123 stocks traded, 754 advanced, 1,074 declined, and the remaining traded flat.
It is crucial for Nifty to not breach its 100-DMA for the rally to continue. On the other hand, if we see Nifty add more distribution days, breaching key moving averages, and begin to see leaders falter at support, we will likely shift the market status to an Uptrend Under Pressure.
The beauty of our CAN SLIM method is that we need not "expect," "hope," or "wish for" with respect to market action. We will take what the market gives us and continue to monitor unfolding conditions. We always look for stocks with strong relative strength. But investors should understand that it is not prudent to blindly buy stocks that have a high relative strength or simply because they have been performing well. This is the essence of momentum investing, and it can get you into trouble. Rather, one should base buying decisions on sound fundamental and technical analysis. Only invest in stocks that have strong fundamentals (i.e., good sales, earnings, and margins, among others) and that are breaking out of sound base structures on heavy volume.