Technical Analysis: Prediction
of Post MPC Outcome
Looking at the post market reaction and trend after the last
four MPC outcome using the chart would better aid in how we relate with the
equity market (for fixed income pardon me for not doing such).
A view at the NSE ASI daily chart below, the vertical sky
blue line represents the exact date of each MPC announcements (20/09/2016,
22/11/2016, 24/01/2017 and 21/03/2017) while the yellow line represent the SMA
100 (trend determination line)
From the chart, we would see that 4 - 5 on average trading
days after the announcements, the market tends to stay in a range and
thereafter move in the direction of the prevailing trend.
Post September 2016 and January 2017 had the market move in
the prevailing trend with exception of November 2016 which had an upside rally
after the few days range but the momentum was not sustained to have a reversal
in trend as the general trend still trades below the SMA 100.
For March 2017 post MPC market reaction, we observed a full
range with the SMA 100 closing in with the index price action and forming an
higher low (an indication of a reversal or change in trend). Therefore, the
post MPC in this period did not conform with the previous 3 announcements and
we had a long range trading for about a month.
Going forward:
What do we expect after the May 2017 MPC outcome?
1.
The current trend is up (index trading above SMA
100)
2.
We expect a range an average of 3-5 trading days
range (history repeats itself)
3.
A positive outlook for the equity market in the
short and medium term while the long term bias has change to neutral
4.
Smart positioning in liquid and volatile
equities with great fundamentals and technical data to work with.
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