Yes, I did expect outperformance in Indian stock markets compared to US and Europe, but certainly not to this extent. I see an "Inverted Head and Shoulder" pattern in Nifty[NF] and BankNifty[BNF].
BankNifty is the banking sectorial index on NSE. Whenever, there are two indices [NF and BNF in this case] forming the same pattern, the likely hood of those fructifying increase greatly. Look at the charts below: [beautiful aren't they :-P]
If the pattern is to give out it’s results, we should see NF topping at around 5800/5900 ish and BNF should top at around 10800/11000 ish. With the quarterly results around the corner we should see this happen in the next month or two.
However, as usual we have to be cautious - market remains an unpredictable beast. If NF were to go down below 5160 and BNF below 9230 then the inverted H&S pattern gets negated. Also the fact that US and Europe have completed the H&S pattern, it warrants us to be extra cautious. I’ll not be too worried about the bullishness in US unless Dow Jones crosses 10700. Another important point to take note of is that the China market has hardly had a bounce back like that of US/Europe, so it would take some time in determining where the global markets decide to go. Let’s hope the Indian markets rallies and then joins the US and Europe markets while going down ;-) [That would be ideal for fund managers].
Question: How to trade in a situation where the local markets are outperforming the global markets.
Answer:
1. You don’t trade the news or the global markets. Listen to what the charts have to say for the security you are trading. Do what the chart asks you to and try not to get influenced by anything else.
2. The best way to make the most of markets is to come up with a trading strategy that always keeps you in the market based on the hourly/daily/weekly chart timeframes.
Trust me #1 and #2 works :-).
-Sri
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