There is a famous saying in the markets – “During Panic, all good news are considered as Bad news, during euphoria all bad news are firmly neglected.” Sentiments and narratives are strong forces that drive the Price Action regardless of fundamentals.
Markets often play according to the tunes of crowd psychology. People’s thinking and decisions most of the time are shaped by Price action and narratives. Take a look at this Image; it simply depicts how an average trader/Investor thinks about the market in response to the Price Action in Different market stages.
Mindset of an Average Trader in Response to Price Action
After looking at the Image, Now read on…
This weekend there was a news report about Mukesh Ambani, the infamous chairman of Reliance Industries getting fined by SEBI for 2007 manipulative trading practices. Despite the significance of such news, Reliance Industries stock prices didn’t even flinch a little. Dalal Street, didn’t care! Take a look at the Chart over here..
Reliance Stock Prices Not Responding to Negative news
Just imagine, if the same type of news headlined about a Small Cap or Mid Cap Company, What would’ve happened? The Company’s shares will be in deep red turmoil on the next second. If you think about it, you can’t help yourself but wonder about the present market situation.
Not only that, Price Action showed many signs of Uptrend losing strength – Momentum Shift, Unexpected selloff, Decreasing trading volume etc. but still we couldn’t see any strong selling pressure in Reliance Industry Stock prices.
When you think based on the earlier point I mentioned about market narrative and Crowd Psychology – Did that Imply, we are in the beginning stages of Market Euphoria? What’s your thought? Let me know in the comments!
