In our previous weekly note, we had mentioned that the market had modestly breached the 27-month-long upward rising channel. Though the lead oscillators were pointing towards being oversold, the 10,040 level remained important all through the week gone by.
In a week that had just three trading sessions, the market ended on a positive note. The benchmark Nifty50 ended the week with net gains of 115 points, or 1.16 per cent, on a weekly basis. One of the most important factors to take note of is that the Nifty50 has managed to defend and crawl back above the critical 10,040 mark and, therefore, the 24-month- long upward rising channel remains intact.
Going into a new week, Nifty50 is expected to see a positive start and move past its 200-day moving average, which stands at 10,180.
All through the coming week, it would be crucial to see if the Nifty50 manages to end above the 200-DMA. The Relative Strength Index or RSI on the weekly chart stands at 45.0478 and it remains neutral, showing no divergence from the price.
The weekly MACD is bearish and it trades below the signal line. No major pattern was observed on the candles.
Pattern analysis shows the Nifty50 has defended and managed to crawl back above the 10,040 mark. This level was crucial. With this level being defended as of now, the 27-month-long upward rising channel remains intact.
Global markets, which have ended on the strong note, have nearly ensured a strong opening next week. However, it may be extremely important to see that despite a very likely strong start, which will see Nifty above the 200-DMA mark in all likelihood, its sustenance above this level and closing above this level will be important.
Also, the Nifty50’s Stochastic remains oversold on the weekly charts and overall we see limited downsides. In any case, defending the 10,040 mark will be crucial not only next week, but also in coming days. Overall, we expect a positive undertone to dominate the market and advise investors to maintain a positive outlook through the week ahead.
Relative Rotation Graphs or RRG for the week shows while majority of the sectors are still seen losing relative momentum mildly, many key sectors are seeing an improvement in their relative momentum against the market and they are attempting major stability.
Relative outperformance can be seen from the services, financial services, FMCG and IT pack in the coming week. Other key sectors such as infrastructure, auto, Midcap50, Nifty Next50 and energy are seen improving their relative momentum. Therefore, these packs may see selective outperformance by their components.
Apart from this, we do not expect any major moves on a weekly basis from pharma, PSU banks, Bank Nifty and the Smalcap universe.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against Nifty index and should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)