Over the past many sessions, the markets were unable to take any major directional calls, however, this week saw the markets rebounding from the lower edge of the trading zone on the back of heavy short covering from the lower levels. The trading range got a bit wider as the index moved in a range of 467.85 points. A few important supports were defended on the weekly charts and the headline index closed with a gain of 415 points (+2.45%) on a weekly basis.
While the week gone by was a truncated one, the coming week is even shorter. We just have three trading days as Tuesday and Friday are trading holidays on account of Mahavir Jayanti and Good Friday, respectively.
This week remains important from a technical perspective.
Nifty defended the 100-week MA as a support on a closing basis. It has also closed a notch above its 50-week MA. The 100- and 50-week MAs are currently placed at 17,104 and 17,320, respectively. Besides this, the index has also defended the pattern support that exists in the form of a falling trend line. The strong up-move that has come on the last trading day of the week has been fuelled by a short covering-led rally. This is evident as the Nifty Futures have shown a decline in Net OI along with the rise.
Another thing that again raises caution is a very sharp decline in volatility. India VIX came off by 15.12% to 12.94. This warrants a high degree of caution while we follow any further moves in the markets.
Monday is likely to see a quiet start to the day. The levels of 17,450 and 17,530 are likely to act as resistance points. The supports come in at 17,180 and 17,000 levels. The trading range will continue to stay wider than usual.
ET CONTRIBUTORSThe weekly RSI is 46.23 and stays neutral. It does not show any divergence against the price. The weekly MACD is bullish and stays below the signal line. PPO remains negative.
The pattern analysis of the weekly charts shows that Nifty has taken support on the falling trendline pattern resistance. This falling trendline begins from the high of 18,604 and joins the subsequent lower tops while extending itself. Apart from this, the index has also defended the 100-week MA which is placed at 17,104, and has closed just above the 50-week MA which is at 17,320 levels. This has redefined the trading zone for the Nifty between 16,900-17,500. Unless either of these levels is taken out or violated, we will see the index oscillating in this range.
As we approach the coming week and follow the extension of the up move, if any, we will need to keep in mind that the Options data suggest the market faces resistance at 17,500 levels. Besides this, we will need to keep a very keen eye on the VIX. Consistently low levels of the India VIX will keep the market participants exposed to violent profit-taking bouts at higher levels.
While we navigate this technical phase of the markets, we will need to keep approaching the markets on a highly cautious and selective note. While keeping leveraged exposures at modest levels, a cautious outlook is advised for the day.In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (Nifty 500 Index), which represents over 95% of the free float market cap of all the stocks listed.
ET CONTRIBUTORS
ET BureauThe analysis of Relative Rotation Graphs (RRG) shows Nifty Mid-cap 100, FMCG, PSE, and Infrastructure indexes in the leading quadrant. These groups are likely to relatively outperform the broader markets. The Nifty Auto and IT sector indices are also inside the leading quadrant but they appear to be giving up on their relative momentum.
Nifty Financial Services index is inside the weakening quadrant but it is seen improving its relative momentum. Besides this, Bank Nifty and PSU Bank index continue to roll inside the weakening quadrant.
Nifty Metal has advanced further inside the lagging quadrant. They may cause the index to relatively underperform the broader markets along with the energy sector index which is also languishing inside the lagging quadrant.
Media index is also inside the lagging quadrant but it is seen attempting to better its relative momentum against the broader markets. The Realty index has mildly rolled inside the improving quadrant while the pharma index is also seen struggling to keep up with its relative momentum which is fast declining.
The consumption index is inside the improving quadrant as well; it is seen rolling firmly in the northeast direction towards the leading quadrant. This group is likely to show resilient performance over the coming days.
Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against 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 at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia
Dalal Street Week Ahead: Tread cautiously! Nifty faces stiff hurdle at 17,500; keep an eye on VIX - The Economic Times
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