INSUBCONTINENT EXCLUSIVE:
Throughout week gone by, domestic equity market continued to face resistance at falling trend line pattern
Though no major downsides were witnessed, Nifty did not make any major upward move either
A major part of previous week saw addition of a significant amount of shorts, but no short covering came through and Nifty settled week with
a net loss of 132 points or 1.22 per cent.
Despite so many shorts in system, market still waiting for a major upward move
Nifty has just ended below its 50-week moving average at 10,753
This level coincides with falling trend line pattern resistance as well
This trend line begins from high of 11,760 and joins subsequent lower top.
Going into a new week, we expect a positive start
It would be important for market to move past above 50-week moving average meaningfully and then subsequent resistance areas on daily charts
As of now, Nifty50 remains trapped in a narrow range and a sharp move, therefore, on either side is possible.
The Relative Strength Index
(RSI) on weekly chart stood at 49.0187; which remains neutral and shows no divergence against price
The weekly MACD remains bullish, as it continues to trade above signal line
An engulfing bullish candle has occurred on charts.
Since it has occurred during a downtrend, it signals a potential bullish reversal
However, it requires confirmation on next trading bar.
All in all, while market continues to struggle to move past key resistance levels, we
expect to see Nifty trade with a positive bias during coming week
Any meaningful upward move will emerge only after index moves past congestion zone at 10,900-10,950
Any move below this level will infuse weakness
With 10,628 level acting as an important support, Nifty will remain in a defined range with 10,900-10,950 zone acting as key
resistance.
Despite struggling at key resistance levels, Nifty has added a good amount of open interest during past week
Downsides, if any, are expected to be limited in coming week, as existing shorts are likely to lend support at lower levels.
We recommend
traders to overall exposures limited, preserve liquidity at lower levels and go for only modest purchases at every dip
Shorts should be avoided as it may lead to short squeeze at lower levels unless Nifty breaches key supports
Overall, a cautiously positive approach is advised for week ahead.
In our look at Relative Rotation Graphs, we compared various sectors
against CNX500, which represents over 95 per cent free-float market-cap of all listed stocks.
It shows market action is likely to remain
limited in select pockets
The pharma index, infrastructure index and Bank Nifty continue to remain in leading quadrant
However, they are taking a breather and consolidating even as momentum gets stalled
PSU Banks, Nifty Consumption Index, financial services and midcap indices also remain in leading quadrant and are keeping their momentum
intact.
Realty and auto indices remain firm in improving quadrant and are maintaining their momentum
Nifty Junior (Nifty Next 50) is moving towards leading quadrant.
The FMCG index has suddenly retraced and it is losing steam along with
broader CNX100 and CNX200 index
The Energy index, along with pharma and metal indices have has crawled in lagging quadrant, but flattened their trajectory
These pockets are likely to witness isolated stock-specific performance.
Important Note: RRGTM charts show you relative strength and
momentum for a group of stocks
In above chart, they show relative performance as against Nifty500 Index (broader markets) and should not be used directly as buy or sell
