INSUBCONTINENT EXCLUSIVE:
The week gone by saw the market consolidate in a 256-point range, as the headline Nifty50 index ended flat with a negligible gain
After bouncing off from a 50-week moving average in the previous week, Nifty continued to trade near the critical zone at 12,100-12,225
throughout the week while making no directional move on either side
As it stayed in a defined range, the headline index ended with a minor gain of 15.10 points, or 0.12 per cent, on a weekly note.
From a
technical perspective, Nifty remained at a critical juncture
Weekly options data showed a predominantly high Call Open Interest buildup at 12,200
This made this level a strong resistance point for the week
India Volatility Index VS remained flat throughout the week, declining 0.96 per cent to 13.61.
BCCL - Non CopyrightFrom a weekly
perspective, the 20-week moving average currently stands at 11,958, and any close below this level would mean a loss of momentum on the
weekly charts as well.
Nifty is likely to see a tepid start to the week ahead, and it may struggle with the critical levels on both daily
The 12,250 and 12,360 levels will act as strong overhead resistance points, while supports will come in at 11,950 and 11,900 levels.
The
Relative Strength Index (RSI) on the daily chart stood at 57.32
It remains neutral and does not show any divergence against price
The weekly MACD remains bearish and trades below the signal line
On the candles, a Doji Star has occurred
Such a formation signals lack of consensus among the market participants
The formation of a Doji has the potential to either stall a rally temporarily or mark a likely reversal point.
Pattern analysis on the
weekly chart showed Nifty is again back inside a broad trading range after bouncing off its 50-week moving average hit a week before
However, with the market continuing to stay in a broad range, it remains vulnerable at higher levels.
In the event of any corrective move,
volatility is likely to increase from current levels
If volatility increases, it can cause the India VIX to rise
The price action of Nifty in the 12,100-12,250 zone would be vital to watch
If Nifty does not move past this range, it will increase vulnerability of the index to any profit-taking move from current levels
It is strongly recommended for traders to stay away from creating any large long positions.
It will be more prudent to stay stock specific
While continuing to adopt a cautious approach, all up-moves, if any, should be used for protection of profits
of the free-float market-cap of all the listed stocks.
BCCL - Non CopyrightBCCL - Non CopyrightA review of the Relative Rotation Graphs
(RRG) shows from the sectoral point of view, only the Realty and the Metal indices are placed in the leading quadrant, though it appears to
be losing mildly on the relative momentum
In the broader market, the Midcap and Smallcap indices are placed in the leading quadrant
All these groups are likely to show relative outperformance against the broader Nifty500 index.
The largest pockets of the market, like
Nifty100 and Nifty200 indices are seen moving ahead in the lagging quadrant
Apart from this, other important sectoral indices like the Financial Services sector, Auto and Bank Nifty indices are also slipping further
in to the weakening quadrant
The Energy Group is seen heading further southward in the lagging quadrant, as is the PSU Bank index, which is sharply losing its relative
momentum and rotating unfavorably.
The Nifty IT index is heading firmly ahead while being placed in the improving quadrant
It is likely to contribute as one of the relative outperformers against the broader market
The FMCG and the Consumption groups are in the process of arresting their underperformance, and some stock-specific action from these groups
In the above chart, they show relative performance against Nifty500 Index (broader markets) and should not be used directly as buy or sell
signals.
(Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst and founder of Gemstone Equity Research - Advisory Services, Vadodara
He can be reached at milan.vaishnav@equityresearch.asia)
