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By Milan Vaishnav, CMT, MSTANifty struggled to find some base and managed to end the week with modest gains even as it traded in a broad range.
The trading range remained moderately broad, but the index oscillated quite a lot, infusing intraday volatility during the trading session.
While holding on to its key support levels, Nifty ended with net gains of 130 points, or 1.17 per cent, on a weekly basis.
Discounting the intraday volatility that remained ingrained, volatility index India VIX declined modestly by 2.57 per cent to 17.14.
Nifty defended two key levels during the previous week; the 200-DMA at 11,270 and the 50-week MA at 11,197.
The 11,197-11,270 zone will act as a key support over the coming days.
Any breach of this zone will invite weakness.
As long as Nifty stays above these levels, we will see some consolidation in a defined range with limited upside for the market.
We expect a stable start to the week ahead.
The likelihood of a temporary or a partial truce between the US and China may aid sentiment to some extent.
Coming back to technicals, Nifty is critically poised, and will struggle with the weak broader technical setup until it takes out a few crucial resistance levels.
In the coming week, the 11,375 and 11,510 levels are likely to act as key resistance for Nifty, while supports will come in at 11,150 and 11,000 levels.
There are chances of the trading range getting wider during the week.
The Relative Strength Index (RSI) on the weekly chart stood at 50.5973.
It remains neutral and does not show any divergence against price.
The weekly MACD is bearish, and continues to trade below the signal line.
No significant formations were seen on the candles.
Pattern analysis of the weekly chart revealed a very distinct bearish divergence of the RSI over the long term.
Apart from this, Nifty has managed to keep its head above the 50-week MA, which currently stands at 11,197.
Any slip below this level will bring in weakness in the market in the coming days.
The market is likely to exhibit volatile behaviour as the week progresses.
On one hand, the broader technical setup remains challenging; while on the other hand, Nifty may keep witnessing short coverings at lower levels, creating limited upside potential.
The market is likely to struggle hard to establish a sustainable upward directional bias.
The coming week is likely to witness a lot of volatility.
We reiterate staying light on exposures and vigilantly protecting profits at higher levels throughout the week.
In our look at Relative Rotation Graphs, we compared various sectors against CNX500 (Nifty500 Index), which represents over 95% of the free-float market-cap of all the listed stocks.
A review of Relative Rotation Graphs (RRG) showed there could be buoyant activity in certain pockets.
Among the FMCG, consumption and the IT indices that remain in the leading quadrant, only the consumption pack has managed to retain its strength.
The IT and FMCG groups are seen losing their relative momentum.
We will see only stock-specific activities among these groups.
The auto and energy indices have firmly advanced into the improving quadrant.
They may contribute to relative outperformance against the broader market along with FMCG and consumption groups.
These sectors may attempt to post resilient performance during the week.
Media and pharma groups have lost their relative momentum against the broader market sharply despite remaining in the improving quadrant and are seen heading southward.
The CPSE index has arrested its decline, and is seen consolidating at the moment.
Apart from these groups, the services, realty, metals, infrastructure, financial services indices and Bank Nifty, especially PSU banks, are likely to be relatively underperform the broader market.
Important Note: RRGTM charts show the relative strength and momentum for a group of stocks.
In the above chart, they showed relative performance against NIFTY500 Index (broader market) and it should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA is a 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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