INSUBCONTINENT EXCLUSIVE:
After having faced resistance in resistance area between 11,800 and 11,840 levels for seven weeks, the stock market loosened up a bit in the
week gone by and ended with losses
Nifty spent the past couple of weeks in a defined range as it remained indecisive and did not make any convincing directional move
This week, it witnessed increased corrective pressure at higher levels and ended with a net loss of 258 points, or 2.19 per cent on a
week-on-week basis.
Nifty has ended below the 20-period MA on the weekly charts
India VIX, the volatility index, currently trades at a multi-month low after having declined
another 8.17 per cent to 12
VIX is trading at one of its lowest points in recent past when the market is near its higher band, which does not paint a pretty picture for
There are higher possibilities of Nifty drifting lower and volatility increasing in the near term.
The market may see a stable start to the
coming week, but 11,700 and 11,865 levels will act as immediate resistance for Nifty, while supports will come in at 11,440 and 11,300
levels.
The Relative Strength Index (RSI) on the weekly chart stood at 52.5485
It remains neutral and does not show any negative divergence against the price
The weekly MACD has turned bearish following a negative crossover
It now trades below its signal line
A falling window has occurred on the candles
A Falling Star pattern has emerged on the candles as the bottom of the previous shadow is above the top of the current shadow
Such a formation usually results in continuation of a downtrend.
Pattern analysis of the weekly chart reveals Nifty failed to breach the
crucial double top resistance formed in the 11,800-11,850 zone
It appears Nifty has formed a congestion zone while making several failed attempts to break above this resistance, and subsequently gave
up.
The index currently trades in a secondary channel after it breached its more significant 30-month-long upward rising channel in October,
Nifty is slipping towards its lower support of the rising channel
If this level is breached, then the possibility of Nifty testing its 50-week moving average in the coming days cannot be ruled out.
All
upward moves, if there are any, will keep the market in a defined range and will remain vulnerable to selloff at higher levels
Given the current technical setup, we recommend keeping exposure at very modest levels on either side
As the market is oversold on short-term indicators, it may see some technical pullback, but again, these pullbacks may not be sustainable at
We recommend staying highly stock specific and approaching the market with caution in the coming week.
In our look at the Relative Rotation
Graphs, we compared various sectors against CNX500 (Nifty500 index), which represents over 95 per cent of the free float market cap of all
the listed stocks.
A review of the relative rotation graphs (RRG) continues to present a mixed picture
Bank Nifty, Financial Services Index, Infrastructure, Services Sector Index, PSE and Realty indices are currently placed in the leading
Out of these groups, the realty pack has made a U-turn into this quadrant fuelled by stark improvement its relative momentum
The Infrastructure and Services indices and Bank Nifty are seen inching higher, and these groups are expected to relatively outperform the
broader market, while PSE and financial services group are likely to take a breather.
Midcap, FMCG and Consumption indices have crawled
further into the improving quadrant and may continue to see stock-specific outperformance compared with Nifty500
PSU banks can also show some resilience compared with other sectors.
Apart from this, Energy, IT, Pharma, Media and Auto indices are
expected to drift and may steadily give up their relative momentum and underperform the broader market.
Important Note: RRGTM charts show
you the relative strength and momentum for a group of stocks
In the above chart, they show relative performance against Nifty500 (broader market) 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 milan.vaishnav@equityresearch.asia)
