Market Sense as on 22nd Feb 2023
Market Breadth
Are we in the extreme oversold territory yet - No. Not yet, if we believe in the market breadth page. Like I mentioned in the previous two updates, Market breadth works best when all three percentage lines are in their extreme zones. At present, we’re not in an extreme oversold territory. For more information on how to use this page, you may check out this blog post: click here.
Nifty500
The week starting 30th Jan appeared that we had taken support at around 14700 levels. Last week was a doji with 50% WCR, which largely meant that we were in an indecision stage. We are also forming a mini coil, very similar to what we had from 26th Dec - 16th Jan which was followed by a 3% decline in Nifty500 in the subsequent week. This week appears to be doing the same, with a 2% fall already. We are again at around 14700 levels, and the chart is looking bearish as of today.
The support from 200EMA is gone. The bear flag that I mentioned in the previous update (click here to read it) is also broken. Next is the test of the budget day’s low. While Nifty managed to break the Budget day’s high and close above it, which was cheered widely by fintwit, same is not true for Nifty500.
50EMA and 200EMA are not magic lines, but they’re important because traders worldwide scan and take action based on them.
Conclusion: Negative stance continues. If you’re a swing/positional trader (like me), you will be noticing that some of your positions will be making gains, while others will be taking away those gains. Breakouts have failed. It is difficult to hold gains for a longer duration.
Till the time we do not take control of 50EMA, it is better to not take fresh trades or if you cannot stop that itch, keep tight stops, even tighter trailing stops, and lesser expectations of higher gains. Avoid leverage, avoid revenge trading, do not believe in profit screenshots, in fact avoid twitter. Take what market gives you and try not to give back to the market. Do not be overly bullish. We are still in a sell-on-rise market.
But one very important thing that you should definitely do is to prepare a watchlist of those stocks that are showing high Relative Strength (RS). There is no point of using RS filter in rising market. It is now when you should be using it. Please use this filter on the Dashboard.
Recently announced quarterly financials + Relative Strength must be checked in order to not enter into those stocks which are already weak.