Stock Market

Dalal Street week ahead: F O expiry ahead, here's how to navigate market

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The domestic market ended the truncated trading week on a negative note.

It was for the seventh consecutive week that Nifty50 faced resistance and was not able to move past the 50-week moving average.

In a week in which the 50-pack traded in a 250-point range, Nifty ended near its lowest point.

The benchmark index lost 155.45 points, or 1.46 per cent, on weekly basis. The coming week will see the expiry of November series derivative contracts, and given the current structure of the charts, we do not expect Nifty to see any meaningful upside. All upward moves, if any, will face resistance from the 50-week moving average, which currently stands at 10,729.

Sustainable pullbacks will occur only after the index moves past this level. The index is likely to face resistance at 10,700 and 10,790 levels, while supports should come in at 10,410 and 10,330 levels. The weekly RSI is currently at 44.8998 and it remains neutral and does not show any divergence from price.

It is seen inching lower after marking a lower high.

The weekly MACD remains bearish as it trades below the signal line.

The PPO or percentage price oscillator, too, stays negative. An engulfing bearish candle has emerged.

If we look at its significance of this candle in the context of the current chart structures, it has occurred near the 50-week moving average.

Since it has occurred near this resistance area, it has reinforced the credibility of the 50-week moving average as the overhead resistance for Nifty going ahead. Pattern analysis shows after breaching the 30-month-long upward rising channel, Nifty has taken support at its 100-week moving average and a triple bottom pattern support is now evident on the charts.

It saw a sharp technical pullback from this zone and this pullback may get stalled at the 50-week moving average, which currently stands at 10,729. In a way, Nifty remains in a broad range between 10,100 on the lower side and 10,750 on the upper side.

The index has been trading more towards its upper range.

It is less likely to witness any significant upward move this coming week and we weakness is likely to persist in the market.

Keep your exposure modest and protect profits at every rise.

With the market facing a difficult trajectory to negotiate in the next few days, one should approach the market with a high degree of caution in the coming week. A look at the Relative Rotation Graphs to compare various sectoral indices against CNX500, which represents over 95 per cent the free float market capitalisation of all the listed stocks, gives a mixed picture. The pharma and IT indices have moved to the weakening quadrant.

This has happened after sustained loss of momentum over the past couple of weeks as these indices are seem to be taking a breather.

The metal index, too, has shown such a move, resulting in a loss of momentum, but it continues to remain in a leading quadrant.

On the other hand, the financial services index, along with Bank Nifty, has moved into the leading quadrant after a parabolic improvement in relative momentum over the past couple of weeks.

The infrastructure and media indices continue to show improvement in momentum relative to the broader market.

In the coming week, we expect relative outperformance from Bank Nifty, financial services and midcap stocks while infrastructure and media stocks are likely to offer resilient performance relative to the broader market. Some improvement on the relative momentum front was also observed in FMCG, consumption, realty and PSU bank stocks along with Nifty Next50 (Nifty Junior) pack.

These indices are likely to witness stock-specific outperformance against the broader market.

No major show is expected from the auto, smallcaps and energy stocks. 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 Nifty500 Index (broader market) and should not be used directly as buy or sell signals.




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