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The market behaviour during the week gone by was on the expected lines.
While the Nifty continued to mark gradual highs, there was no meaningful upward move.
Nifty spent the truncated week marking marginal highs and continued to consolidate at higher levels.
The benchmark index ended the week 86.35 points, or 0.75 per cent, higher.
As we approach the new week, we continue to stare at a Nifty that remains overbought and overextended on the charts.
The coming week is likely to be dominated by rollover-centric activities.
The high of the previous week, i.e.
11,620, might pose initial resistance.
The 11,650 and 11,785 levels will pose technical resistance for the market in the coming week.
Supports may come in lower at 11,460 and 11,350 levels.
As often mentioned in our previous notes, the way the market is marking marginal highs has caused the supports to drift lower.
The RSI on the weekly charts stood at 75.0567.
Though the RSI has marked a fresh 14-period high, which is a bullish indication, we cannot overlook the fact that it is in the overbought zone.
The index shows no divergence against the price.
The weekly MACD remains bullish as it trades above the signal line.
A rising window occurred on the candles.
Though such candles with a gap usually imply continuation of the upward move, the overbought nature of the market may pose resistance to such attempt.
It also needs confirmation on the following bar.
The RSI on the weekly charts stood at 75.0567.
While overbought nature of the market may trigger some corrective moves, the overall upward trend is likely to remain intact.
The expiry of the current derivative series may induce increased volatility.
We recommend more emphasis on protecting profits than initiating fresh positions.
Overall, the portfolio may be kept light and a higher degree of caution should be exercised at higher levels.
In study of Relative Rotation Graphs, we compared various sectors against CNX500, which represents over 95% the free float market-cap of all the stocks listed.
It showed we will continue to see outright relative outperformance from the energy, FMCG and pharma packs against the broader market.
There is distinct improvement in relative momentum in the CNX Midcap, NIFTY NEXT 50, Nifty Infra and Nifty Metal packs.
This may cause these sectors to consolidate and show stock-specific outperformance against the broader market.
Auto and Media packs are deteriorating and showing weak performance and they may continue to lose momentum.
Realty, too, is not expected to put up any major show.
Bank Nifty and Financial Services are likely to move into the weakening quadrant, but may continue to throw up sporadic and stock-specific outperformance along with IT.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks.
In the above chart, they show relative performance as against Nifty and should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research Advisory Services, Vadodara.
He can be reached at This email address is being protected from spambots.
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D-Street week ahead: Expiry week to add volatility, make Nifty vulnerable
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