Dalal Street week ahead: Market likely to stabilise, may see technical pullback
The Indian market is set to see a stable opening in Monday’s session.
As mentioned in the previous weekly note, the broader technical setup continues to be weak. However, few indicators suggest that the market may attempt some bounce. Even if this happens, the bounce will remain limited, and Nifty will continue to face pressure at higher levels. On the downside, the 100-week moving average, which is present at 10,870, will remain a crucial level to watch over the coming days.
The global setup has improved a bit over the weekend, and this may reflect on the opening of the Asian trade.
The Indian market is set to see a stable opening in Monday’s session and may remain range-bound in initial trade. The 11,140 and 11,230 levels are likely to act as key resistance points. Supports will come in at 11,900 and 11,810 levels.
The weekly RSI stood at 40.9690; it remains neutral and does not show any divergence against price. The weekly MACD continues to stay bearish and trades below the signal line.
No significant formations were seen on the candles. Pattern analysis on the weekly chart showed Nifty took support on the 100-week moving average, which currently stands at 10,870, after breaching the trend line of the secondary rising channel. Over and above this, the index has also formed a rounding-top formation, which might potentially be a bearish signal going ahead.
The coming week will see the market attempt to stabilise and make some technical pullback. However, all such pullbacks, if any, will face resistance at the 50-week moving average, which currently stands at 11,140. The market remains vulnerable at higher levels, given the weak broader technical setup. Volatility, too, will remain ingrained and may rise in the coming days. While avoiding aggressive bets, a highly stock and sector-specific approach is advised for the following week.
In our look at Relative Rotation Graphs, we compared various sectors against the CNX500 (Nifty500) index, which represents over 95 per cent of free-float market capitalisation of all the listed stocks.
A review of the Relative Rotation Graphs (RRG) showed sectors like IT, FMCG and consumption are likely to remain safe haven for investors and traders alike in the days to come. The FMCG and Consumption indices have advanced firmly in the improving quadrant while maintaining their relative momentum against the broader market. The IT pack is rapidly advancing to enter the improving quadrant. The Media and Pharma Indices are crawling in the improving quadrant and may outperform on a selective basis.
Though Infrastructure, Realty, Financial Services, and Services sector indices remain in the leading quadrant, they all are losing their relative momentum and heading lower. They may stay resilient but gradually give up if the weakness persists for long.
The Bank Nifty, PSU Banks, PSE, CPSE, Auto, Metals, and Energy packs are steadily losing their relative momentum against the broader market. They are likely to continue the relative underperformance against the broader market.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance against Nifty500 (broader market) 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)