Search This Blog

Saturday, March 28, 2020

Week 13-2020 Closing Notes

Carrying forward from previous update ( link here ), 28600 +/- 100 has been mentioned as the last line of defense which has shown retracement intraday basis however we prefer to see support and resistance honored on a closing basis to be held valid. On Mar-24, the index closed at his critical support level but failed to make any reversal the next day confirming our view that uncertainty prevails at the market and one shall remain flexible to accept the unexpected.  Currently, we do not hold a bullish or bearish view on the index, rather our opinion is that the market is reacting to panic waves worldwide with no clarity on technicals therefore cautious approach should be adopted.

WoW basis, average weekly capitalization has once again fared another worst, although not as bad as one of the previous week but still dismal performance. Capitalization improved on the last day of the trading week but we do not regard it as a positive signal until further confirmation. 

If the current positive spike is to be regarded as a correction only then resistance falls in the range of 28600-29000 +/- 100. However, if the market continues to close above this resistance line with growing capitalization then it may be assumed as short term uptrend caused by oversold conditions. Shall the market start to fall again, the bottom side remains open to a new lower low with no visible support estimated so far. 

The true magnitude of the COVID-19 led economic damage can be only estimated once the pandemic is over and life return to normal. A hypothetical worst-case scenario is an index finding support at any of these suggested levels 25700-23950-20600-17800-15000 +/- 100.  We urge not to speculate on index support and resistance until panic settles down. We also reiterate our previous stance that the market needs to close and trade above 36300 +/- 300 in order to be considered bulls return.

Looking forward, we expect value hunting season to be on in blue-chip stocks by risk-averse investors who prefer to build positions for medium to long term. While value investors and traders should hold their horses until stability returns. 

Critical dates ahead are 1-Apr and 13-May for PIB auction while MTB auction falls on 8-Apr, 22-Apr, 6-May and 20-May. Given the critical situation of equities worldwide, there is going to be a renewed attraction of local investors towards interest-bearing instruments. This hurts the equities in the form of capital drain unless the interest rates are revised steeply downwards to make these instruments unattractive. Happy trading! 

  1. MTB:
  2. PIB: