Volatility also remained relatively unchanged compared to last week. India VIX increased by just 2.79% on a weekly basis to 13.18. Nifty’s weekly trading range also remained quite limited. The index fluctuated within a range of just 268.90 points before registering a weekly gain of just 35.50 points (+0.15%).
Next week is the expiry week of the monthly derivatives series. In addition to this, in the past sessions, the market has clearly shown signs of fatigue. Weak candlesticks have been forming frequently on the daily chart, increasing the possibility of a breather and a cautious corrective retracement. Judging from the derivatives data as well, Nifty is likely to face strong resistance in the 23,600-23,650 zone.
ETMarkets.comThis means that even if there is a small upswing, we cannot expect a sustained upward movement unless the price firmly breaks through the 23,600-23,650 zone.
It should be used to protect your interests at a higher level.
Trade on Monday is expected to begin quietly. The 23,650 and 23,790 levels are likely to act as resistance points for Nifty. Support is at 23,300 and 23,180 levels. The weekly RSI is at 68.54. It has not recorded a new high along with the price and is indicating a bearish divergence against the price. The weekly MACD is bullish and remains above the signal line. A spinning top has emerged in the candlestick.
This not only reflects indecisiveness among market participants but also has the potential to stall an ongoing uptrend if such a formation occurs near the highs.
Pattern analysis indicates that Nifty is trying to break out of the small ascending channel that has formed. However, though the index is forming incremental higher, it is unable to achieve a clear breakout. Unless there is a convincing breach of the 23,600-23,650 zone, the market may find it difficult to maintain a sustained upward trend.
Overall, the current technical setup is showing a lot of indecision, uncertainty and hesitation among market participants. In the current structure, rather than blindly chasing the upward moves, use these moves to protect your profits at higher levels unless a trending move occurs. It would be wise to protect and lock in profits on stocks that have surged too high and move your investment towards stocks that are showing promising chart setups along with improving relative strength.
It is recommended to rotate investments effectively while maintaining a cautious view on the markets over the coming week, while keeping leverage exposure at moderate levels.
Relative Rotation Graphs® compared various sectors to the CNX500 (NIFTY 500 index), which represents over 95% of the free float market capitalization of all listed stocks.
ETMarkets.comETMarkets.comThe Relative Rotation Graph (RRG) shows that the Nifty Metal Index is losing relative momentum while remaining within the leading quadrant.
Realty, Consumer, Auto and Midcap 100 indices are also in the Leading quadrant. Overall, these groups are likely to outperform the broader market relatively. Nifty Infrastructure, PSE, PSU Bank, Energy and Commodity indices remain in the Weakening quadrant.
The Nifty Pharma index has entered the lagging quadrant. In addition to this, the services sector index and the IT index are also in the lagging quadrant. While the services sector index has weakened, the IT and Pharma indexes seem to be improving their momentum relative to the broader market.
Bank Nifty, Nifty Media, Financial Services and FMCG indices are placed in the improving quadrant.
(Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. The above chart shows the relative performance against the NIFTY500 index (broader market) and should not be used directly as a buy or sell signal.)
(The author, CMT, MSTA, is a Consulting Technical Analyst.
EquityResearch.asia and ChartWizard.ae.
