Next week is still extremely crucial; It would be of utmost importance for the markets to defend the most immediate low of 16782. If this is violated, then the markets may be in more trouble. The Nifty has also slipped below the 20-period SMA currently at 17405. This has dragged the resistance point for the Nifty lower. The most immediate zone for the Nifty is formed between 16780-17400; the index will have to move past this point to resume bullish momentum. Few signs have emerged to suggest a possible pullback as well, making it even more important to keep an eye on the next week.
Volatility rose little by little; INDIAVIX was up 1.73% to 16.34. Next week the 17200 and 17400 levels are likely to act as resistance points. Support comes at the 16780 and 16680 levels. The trading range is likely to remain wider than usual in the coming days.
The Relative Strength Index (RSI) on the weekly chart is 50.87. The RSI shows a bullish divergence against the price; While the price hit a new 14-period low, the RSI did not. This resulted in a bullish divergence. The weekly MACD it is bearish and is below the signal line.
A bearish engulfing candle has emerged on the charts. This has occurred after a downtrend and close to minor pattern support. This is likely to necessitate a reversal and the formation of a probable base. However, it is extremely important to note that this will need a confirmation and the Nifty will also have to defend the more immediate kill.
16782 point.
As mentioned in the weekly technical note above, Nifty's move beyond the 17000-17200 zone will be significant. If the Nifty moves above this zone, it will at least remain under broad consolidation and not invite further weakness. Defending the 16780 levels will be crucial; We will see that the markets will continue to be very specific to stocks for the next few days. It is unlikely that a particular sectoral domain exists; however, we may see pockets like Consumption, Midcap, select auto stocks, and pharmaceuticals performing relatively well alongside IT. It is recommended to avoid aggressive exposures; A very cautious and selective approach is recommended for the next week.
In our Relative Rotation Graphsยฎ analysis, we compared various sectors with CNX500 (Nifty 500 Index), which represents more than 95% of free float. market limit of all listed actions.
Analysis of the relative rotation graphs (GRRs) shows that the automatic index has shifted within the main quadrant. Other than that, Nifty Energy, Infrastructure, Midcap, PSUBank, and Media index are also within the leading quadrant.
The Nifty Realty Index has slipped into the weakening quadrant. Aside from this, the Nifty IT and SmallCap Index are also within the weakening quadrant, but appear to be improving in relative momentum. The Nifty Service sector index has also moved within the weakening quadrant.
Nifty FMCG continues to languish within the lagging quadrant along with the Consumer Index. Nifty Metal is also within the lagging quadrant, but a strong improvement in its relative momentum is seen.
The Pharma index has rolled into the improvement quadrant. This points to a possible end to the relatively poor performance of this sector. Nifty Bank also remains in the improvement quadrant.
Important note: RRGTM charts show the relative strength and momentum of 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, is a consulting technical analyst and founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia Milan Vaishnav, CMT, MSTA
