INSUBCONTINENT EXCLUSIVE:
Following the announcement of Friday’s fiscal stimulus, the market extended its gains in the following week, but at the same time
consolidated at higher levels
After some more follow-up upmove in the first half of the week, the market spent the second half in volatile consolidation, even as some
profit taking took place at higher levels.
Nifty came off 180-odd points from its highest point before closing the week with a net gain of
238.20 points, or 2.11 per cent.
Signs of some exhaustion and profit-booking were visible in the market in the last two sessions of trade
The coming week is a truncated one, with Wednesday being a trading holiday on account of Gandhi Jayanti
The week is also likely to remain volatile and witness some broadbased consolidation and likely profit taking at higher levels
Over the past couple of days, the Indian Volatility Index, INDIA VIX, has risen to 16.11 from the low of 12.30.
The new week is likely to
see a subdued start, and in the event of any rally, the 11,600-11,700 zone will pose stiff resistance to Nifty
Weak global markets and rising tension in the Gulf between Saudi Arabia and Iran may trigger some risk-off trade in global markets, though
to a limited extent.
The coming week will see the 11,645 and 11,730 levels act as resistance points for Nifty
Supports will come in at 11,410 and 11,330
In the event of any consolidation or profit taking, the range for the week ahead is going to be wider than usual.
The RSI on the weekly
chart stands at 55.7654; it remains neutral and does not show any divergence from the price
The weekly MACD stays bearish and trades above the signal line
A rising window occurred on the candles
Such a formation results out of a gap
However, in the present setup, this formation may not be as potent given the overstretched nature of the market.
Pattern analysis shows
Nifty bounced out the 100-week moving average, which has been acting as a proxy trend line over the past few weeks
As of today, it has taken support at a short-term 20-week MA, which is currently at 11,413
Any slip below this level will infuse weakness in the market.
Signs of some money being taken off the table were visible as the
consolidation, and minor downside on Friday came with the shedding of open interest in the derivative segment
The RSI, which is a lead indicator, does not show any divergence, but it is marking a lower top, and it is not rising with as much vigor as
A couple of lead indicators also remain in the overbought zone on the daily chart
This overstretched setup on the short-term charts is likely to prevent any sustainable rise in the market in the immediate short term
While curtailing high volume purchases, traders should approach the market with plenty of precaution and in a cautious way.
In our look at
Relative Rotation Graphs, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float
market-cap of all the listed stocks.
A review of Relative Rotation Graphs (RRG) shows some revival attempts in Nifty Energy Index
The index, though it continues to remain in the lagging quadrant, is showing a steep rise in relative momentum over the past couple of weeks
Along with this, the Consumption and FMCG indices firmly placed in the leading quadrant
The Auto Index is steadily advancing as it remains in the improving quadrant
These groups are likely to remain resilient to any downside and will continue to relatively outperform the broader market.
Nifty Pharma and
Media indices are seen faltering as they continue to be in the improving quadrant
They are expected to continue to relatively underperform unless they pick up on momentum, which seems stalled.
Nifty Financial Services,
Metal, Services Sector, Realty and PSU Bank indices and Bank Nifty are seen losing momentum steadily
They may relatively underperform the broader markets.
Important Note: (Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at
Gemstone Equity Research - Advisory Services, Vadodara
He can be reached at
milan.vaishnav@equityresearch.asia)
