Over the last five sessions, markets continued to rise as they strengthened in the process. And with conviction in the journey, the business field also expanded as expected. Against the previous week’s trading range of 390.35 points, the Nifty moved 610.05 points this week as it added strength to its movement. While bypassing some critical levels, the headline index closed with a net gain of 670.25 points on a weekly basis. Among the few technical highlights that took place was that the Nifty kept its head above the crucial 16000 level and then inched higher. In the process, the index also moved past the 20-week MA which stands at 16580 levels. The most logical move is likely to take the markets to the 50 week MA which is currently set at 17073. Even the options data suggests that the markets will reach this and also take a breather as the highest call OI is placed at this strike price.
But having said that, it must also be noted that this may not happen except with a short consolidation, which is very likely to occur.
We are entering the expiration week of monthly derivatives classes and the next few sessions will likely remain dominated by rollover-oriented activity. Next week is likely to see the 16850 and 17000 levels acting as potential resistance points. The supports come in 16550 and 16435 levels. The business scope will continue to be wider than usual.
Weekly RSI is 51.69; it remains neutral and shows no deviation in price. The weekly MACD is bearish and remains below the signal line. However, the Histogram is significantly narrowing; Next week, this indicator may show a positive carryover.
A large white candle appears on the charts. This reflects the policy-oriented consensus of market participants on the increase.
The pattern analysis shows some technically important points. Firstly, Nifty has comfortably crossed the crucial 15700-16000 levels. This was the support that the index had broken on the way down; it then acted as resistance when Nifty was trying to move higher. Furthermore, Nifty has also moved above its 20-week MA. Some consolidation and expiration paths are likely to take place, but speaking on a broader basis, it is most likely to head towards the 50-week MA which is set at 17073 levels.
The overall environment was stable; this was reflected in the volatility, which decreased even more compared to the previous week. INDIAVIX fell 5.38% to 16.65. Next week some defenders like Pharma could do well along with selected financial pockets.
Apart from this, we are also likely to see laggards like IT trying to play as well. Overall, the coming week is likely to be very stock-specific. It is recommended that any moves on the higher side be used more to protect profits at higher levels rather than continue blindly chasing the upgrade. There may not be major downsides on the cards, but profit booking from higher levels may not be ruled out.
In our review of Relative Rotation Graphs®, we compared various sectors to the CNX500 (NIFTY 500 Index), which represents over 95% of the market capitalization of all listed stocks.
Analysis of Relative Rotation Graphs (RRG) shows that the Nifty Financial Services Index has rolled into a leading . It combines Nifty Auto, Bank Nifty, FMCG and Consumption indices which are also placed in the top quartile. We can expect these groups to continue to outperform the broader markets relatively.
Nifty Infrastructure, PSE and Energy groups are seen trending lower in the weakness quarter. Midcap Index while inside the late quarter is seen trying to turn back towards the leading quarter.
Nifty commodities and metal indices continue to be muted in the late quarter. Media and IT indices are also in the late quarter but are seen trying hard to regain relative momentum against the broader markets.
This could see some stock-specific outperformance from these pockets. The Nifty Realty Index is seen turning tight as it enters the improving quarter. The Nifty Services index has also rolled into the improving quarter signaling a possible end to its phase of underperformance against the broader markets.
Important note: RRGTM charts show relative strength and momentum for a group of stocks. In the chart above, they show relative performance to the NIFTY500 index (broader markets) and should not be used directly as a buy or sell signal.
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