Market MATH & Watchlist

23-June-2024: Markets at overbought zone but no signs of bearishness YET

MATH: Momentum Anticipation and Trend by Homma:

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MATH last week: Click the link

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As technical traders, We

“Anticipate, but confirm. Wish, but only react.”

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Trend:

The short-term trend is UP.

But now at the overbought zone.

Major stocks have pulled back to their 10 SMA but are still above their 20 SMA.

Momentum:

Short-term momentum is still Up.

10-day momentum is at massively overbought levels.

But the 20-day momentum is still some way off from its overbought levels.

N50:

Comfortably above the Ascending Channel.

But now basing in a ~1.2% range.

N500:

Comfortably above the Ascending Channel.

But now basing in a ~1.5% range.

I like the range contraction here.

Net4% Movers:

Still printing massively bullish values throughout last week.

Anticipation:

A tricky time for sure.

Markets are at overbought levels, no doubt.

But, there are no signs of bearishness at all.

Can we make a case that, bearishness will set in this coming week?

NOT convincingly.

Can we make a case that, this bullish action will continue despite markets being at overbought levels?

NOT convincingly.

Can markets pull back/correct next week?

Yes, it can.

Can markets go higher?

Yes, it can.

As a swing trader, I plan to react to what happens next week. I am open to both possibilities and I have a neutral bias. I don’t have a strong reason to “not be” bullish or bearish.

A breakout of the N500 consolidation will add good confirmation to go aggressive again for a 3-5-day swing.

Whilst, a breakdown would signal a possible correction.

My top priority is to give back minimal gains while still trying to bet on strong stocks in low-risk areas in case we break out.

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Summary:

Strongest (short term and medium term):

Last week we had notable moves from the Fertilizers-Agrochem-Spec Chemical space. The previously strong space also had decent moves viz. Defence, Railways.

Apart from these groups (Railways, defense, PSUs in general).

This week I will be on the lookout for strength from the following sectors:

• Jewelers

• Sugars

• Private Banks

• EMS

On top of these, IT, FMCG, and Pharma have pulled back to decent support on the index level. These can give a bounce.

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Watchlists: