In a trending and strong week, the Indian equity markets staged a strong move and ended with gains. In the week before this one, the markets had taken a breather; however, the past five-session saw the NIFTY moving higher again. After spending some time and struggling to take out the 17500 levels, the last trading session of the week remained strong. The market was able to move above this key level as it ended on a strong note on Friday. Over the past five days, the Index had a trading range of 700-odd points. The benchmark NIFTY50 closed with decent gains of 517.45 points (+3.02%) on a weekly basis.
The previous five sessions remained important from the technical perspective as well. The markets rebounded from the low point of 17003; it is near this point that the all-important 200-DMA stands presently at 17078. This level has now become near-term support for the NIFTY on a closing basis. Secondly, coming to the weekly charts, the NIFTY has been able to move past the 20-Week MA which recently stands at 17272. So to speak from a medium-term perspective, the zone of 17050-17300 has now become an important support zone for the coming weeks. We can fairly expect this support range to stay defended at least for now.
Volatility reduced over the past week. INDIAVIX came off significantly by 21.32% to 18.43. Monday may see a stable start to the week. The levels of 17800 and 17905 will act as probable resistance points; the supports may come in at 17500 and 17320 levels. The trading range for the markets over the coming five sessions will stay wider than usual.
The weekly RSI is 55.77; it stays neutral and does not see any divergence against the price. The weekly MACD is bullish and stays below the signal line. However, it appears that the slope of the histogram is narrowing and if this continues, then we may see a positive crossover on this indicator in the coming weeks.
A strong white candle emerged; this reflected the bullish directional consensus of the market participants throughout the week.
The pattern analysis shows that the NIFTY had slipped below the 50-Week MA which is presently at 16762. However, it rebounded quickly and held that level as a support on a closing basis. Following the most recent up move, the NIFTY has also managed to stay above the trend line support and it has also managed to move past the 20-Week MA which presently stands at 17272.
Overall, unless there are fresh negative triggers, it is expected that the markets may continue trading higher even if they remain in a broad range. So long as the NIFTY stays above 17300 which is the first pattern support on the weekly charts, the overall trend may stay intact. Also, so long as the NIFTY is above 17300, shorts should not be attempted; in fact, all downsides must be used to make select purchases. However, given the geopolitical tensions continuing to stay fluid, aggressive positions and excess leverage should be avoided. While continuing to stay light on overall positions, a cautiously positive approach is advised for the coming week.
In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.
The analysis of Relative Rotation Graphs (RRG) shows that despite staying in the leading quadrant, the Energy, Commodities, PSE, PSU Bank, and the NIFTY Bank Indices are seen consolidating and giving up on their relative momentum. It is the Metal Index that looks firmly placed inside the leading quadrant.
The NIFTY Auto index is seen diving further southwest while staying in the weakening quadrant. It is likely to continue to relatively underperform the broader markets. The NIFTY Media and Infrastructure Indices also stay inside the weakening quadrant but they appear to be trying to improve on their relative momentum.
NIFTY IT, which stays in the lagging quadrant is sharply improving its relative momentum against the broader NIFTY500 index. A similar move is also seen with the Consumption Index which is on the verge of rolling inside the improving quadrant. The Midcap 100 and Realty Index are also inside the lagging quadrant, but both the tails appear to be in a rising trajectory.
While the NIFTY Financial Service index is seen turning back and moving towards the lagging quadrant, the FMCG index is showing a healthy move inside the improving quadrant. This pocket may likely outperform the broader market on relative terms.
Important Note: RRG™ charts show the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
