The stock markets started the new year with setbacks and also remained restless. in the previous technical note, it was mentioned that as long as the NIFTY remains below its crucial 18300-18600 resistance zone, it will remain in a trading zone that it created for itself. The range also remained unchanged; the index has fluctuated 456 points over the past five sessions; Markets have remained under strong corrective pressure for the last three sessions. However, the index has maintained its near-term support point; it ended with a net loss of 245.85 points (-1.36%) on a weekly basis.
Navigating the coming week will not be easy; The US markets have finished strong and this will cause our markets to open more as well. However, the behavior of the NIFTY near 18300 and between 18300 and 18600 will be extremely important over the coming days and weeks. If this zone is not meaningfully navigated to the upside, not only will the markets trade in a wide range, but they will also remain vulnerable to bouts of corrections from higher levels. volatility increased slightly; INDIAVIX was up 1.06% to 15.02.
As markets inherit positive global cues, markets could see a positive start to the week. In the coming week, the 18040 and 18290 levels are likely to act as potential resistance points. Support will come in at the 17600 and 17480 levels. The trading range could widen a bit this week.
The weekly newspaper Relative Strength Index (RSI) is 52.14; it remains neutral and shows no divergence on the price. The weekly newspaper Convergence/divergence moving average oscillator (MACD) has shown a negative crossover; it is now bearish and trading below the signal line.
Pattern analysis of the weekly chart shows that after a failed breakout and a dip below the crucial 18600 level, NIFTY finds support at the 20-week moving average (MA), which currently stands at 17863. The index ended a notch below dot but the expected positive start will see NIFTY trade above this level. However, it will be important for the index to stay above this 20-week ma on a closing basis.
The coming week should be approached similarly; They would have to approach it just as cautiously as they did the previous week. On the daily chart, the 100-day ma level has been retested; Although the index ended slightly below this level, it would be necessary to defend this level on a closing basis to stay below broad consolidation and avoid increasing weakness. Maintaining leveraged global exposure at a modest level is highly recommended. On Friday there was a sharp drop in the US Dollar Index; This should bode well for commodity and metals stocks. A cautiously positive outlook is warranted for the coming week.
Industry analysis for the coming week
In our look at Relative Rotation Graphs®, we compared various sectors to the CNX500 (NIFTY 500 Index), which represents over 95% of the free float market capitalization of all listed stocks
The analysis of the Relative Rotation Graphs (RRG) shows no significant changes in the sectoral composition compared to the previous week. We have Commodities, Financial Services, PSU Banks, Banknifty, PSE, Infrastructure and Services Sector indices within the leading quadrant. All of these groups will relatively outperform the broader markets.
The service sector and the Nifty Bank Index show a slight weakness in their relative momentum; this can lead to subdued performance of these groups.
NIFTY Midcap 100 and FMCG indices are in the lagging quadrant; however, they are observed to improve their relative dynamics. NIFTY Auto, Consumer, Media and Pharma languish in the lagging quadrant.
NIFTY Energy is in the improving quadrant along with the IT Index. It should show some stock-specific isolated relative outperformance in the coming week.
Important NOTE: RRG™ charts show relative strength and momentum for a group of stocks. In the chart above they show relative performance against the NIFTY500 Index (broader markets) and should not be used directly as buy or sell signals.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Milan Vaishnav, CMT, MSTA is a capital markets professional with nearly two decades of experience. His area of expertise includes consulting in portfolio/fund management and advisory services. Milan is the founder of ChartWizard FZE (UAE) and Gemstone Equity Research & Advisory Services. As a Consulting Technical Research Analyst and with over 15 years’ experience in the Indian capital markets, he has provided clients with world-class India-focused independent technical research. He is currently a daily contributor to ET Markets and The Economic Times of India. He is also the author of one of India’s most accurate Daily/Weekly Market Outlooks – a Daily/Weekly Newsletter currently in its 18th year of publication.
