Happy New Year everyone!
2017 was a trend up profile and a good one if you were a Bull. Stocks went up and virtually everything which could be bought was up. It happens when you get a strong Trend profile. It opens at one end and closes at the other. The Nifty opened at 8133 and hit a high of 10552 before closing at 10530 for the year.
By now everyone knows it is a Bull market and it has been a good one.
Roughly, in the past few years, the market is long with a weighted average price of major participants at 8100- 8200. This means that people have made money and are sitting in big profits. It also means that the triggers for a big shakeout lower are not there because the participants are in profits right? At least the big ones are, and in quite a large running profit. So there isn’t a scope for a shakeout or the burning of old hands as we saw in 2007 and previous years. Only the late participants or those entering now are at risk. The Older players would stay invested as long as they see price holding over the 8100- 8200 mark in the year ahead.
At 10500 current market price, that is quite a cushion.
But the message would be to the new players. Price is stretched too far away from the mean of the bigger players, and an entry here carries a higher risk for you. In short, the risk to reward ratio for a longer term entry is skewed here and carries higher risk. But it would be ok to hold your investments if you have them with you from the past 3 years and more. The other message is pick and choose your stocks well. It won’t be easy like 2017.
But we are shorter term Traders. We would like to break it down for the next one year and the next one quarter and the next one month and the next week right?
The next month and the next week are beyond the purview of this post ( but we do them on our blog every week) but here’s what I feel about 2018.
But first a closer look at 2017.
So 2017 was a trend up profile like I have mentioned earlier, and was traded with a vwap of 9600 with the highest volume concentration or (POC as we call it in MarketProfile) at 9945. That liquidity which came in the markets in 2017 is happy now and seeing profits.
So it looks like 9600 would be a good supporting base for the year ahead. Only some major volume below 9600 ( created maybe through a geopolitical storm) can shake participants off. And if you are a longer termer and looking to invest then you should watch this 9600 zone in the months ahead for buying opportunities.
On the upper side the projection is to 11400 to 11600 on the Nifty from here ( cmp is 10500).
So overall we are looking for the Nifty to trade between 9600 on the lower side and 11600 on the higher side through 2018.
It flows from the Market Profile principle of an imbalance turning to a Balance. So 9600 t0 11600 would be a good 2000 point range for the Nifty to trade in for most of the year before we get into another imbalance cycle with the elections in 2019 at the Centre.
I can’t finish this post without mentioning about the scenario below 9600 or 11500 Nifty. It’s the business of probabilities right, and any percentage move however small should be addressed. We are in the business of MTM so any targets we mention have to be tied down to a date and a probability. This post is about 2018 and we want to stick to the possibilities for the coming 12 months only. You won’t find us throwing random numbers like 15000 Nifty and 3000 Nifty without adding a calendar date to it.
So back to the point, below 9600 roughly the market is in trouble and should restest the 8800- 8900 zone which is top of the balance of the past two years. You know what will happen if that balance also does not hold right? However remote it may sound a break of 8800 can open the doors back to 8100 and then 6800 again. In the order of things expected for the year this possibility is lower.
And above 11600 the Nifty can rally to 12240 by the close of the year. Yes, that is not much and it is very rare to find two back to back trend up profiles or in this case 2 back to back trend up years. So I’m very clear that the upper limit is at 12250 if not 11600.
But’s that’s 2018 yeah!
For 2019 we make fresh reviews 🙂