A week ago: NIFTY can maintain ranged attacks. A trend shift occurs only when these edges are violated | India analysis

The market closed lower for the third week in a row. Over the last five sessions, Nifty has largely maintained a downward trajectory except for the last trading day when it showed some relief from lower levels. After a major weekly decline of 1167 points two weeks ago, Nifty has been trading in a relatively lower range but has shown an overall weak bias. The trading range remained similar to the previous week. Nifty has fluctuated 644 points in the last five days. Volatility remained stagnant. India Vix fell 1.38% on a weekly basis to 13.04. The headline index ended the week with a net loss of 110.20 points (-0.44%) as it continues to find support for short-term patterns.

Many important levels were tested last week. Several important levels should also be observed. Nifty has tested its 20-week MA which is currently at 24657. The 100-day MA is currently at 24507. This makes 24500-24650 a very important support area for the index. On the other hand, derivatives data shows maximum accumulation of Call OI in the range of 25000-25100, with these levels becoming immediate resistance areas for the market. This is likely to keep the market limited in scope. If the technical bounce extends, resistance is likely to be found in the 25000-25100 area. If it breaks below the 24650-24500 area in the same range, the market will weaken. Unless any of these ranges are violated, Nifty is expected to oscillate back and forth in the defined range.

Next week is expected to start quietly. The 25000 and 25130 levels are likely to act as resistance points for the market. Support is provided at the 24650 and 24450 levels.

Weekly RSI is 57.70. It remains neutral and does not show any difference in price. Weekly MACD is trending lower and trading below the signal line.

Pattern analysis of the weekly charts shows that Nifty is finding support at an extended trend line. This trend line starts at 22124 and joins higher highs during the extension. Apart from this, this pattern support on the weekly chart coincides with the 20-week MA and 100-day MA, making the 24500-24650 area an important short-term support area for Nifty. If this area is breached, you will see gradual weakness seeping into the market.

Next week will likely remain remote. As long as Nifty is between 24500 and 25000 levels, no trend is seen. It is only when higher levels are removed or lower levels are violated that we see the trend reemerge in the market. Until that happens, the market is expected to remain in a range. However, it is also important to note that unless the 25000-25100 area is cleared, we remain vulnerable to profit taking at higher levels. Major sectoral changes are occurring in the market that could lead to a change in leadership. The relative strength of banking and financial industries, including energy and consumption, is also expected to improve. It is recommended that you continue to adopt a highly selective approach while keeping your overall leverage exposure at a moderate level.

Next week’s sector analysis

With Relative Rotation Graphs®, we compared various sectors with the CNX500 (NIFTY 500 Index), which represents more than 95% of the free float market capitalization of all listed stocks.

Relative Rotation Graph (RRG) shows that Nifty IT, Pharmaceutical, Consumption, FMCG and Services sector indices are within the major quadrants. With the exception of the services sector index, all sectors are showing slowing momentum relative to the broader market. But they may continue to show resilient performance next week.

MidCap 100 and Nifty Auto Index are within the bearish quadrant. They may continue to give up relative performance.

Energy, Commodities, PSE, Real Estate, Nifty Bank, Infrastructure, Metals and PSU Bank indices are within the lagging quadrant. However, with the exception of the Infrastructure and PSE indices, all other indices are showing significant improvement in their relative momentum compared to the overall market.

Nifty Financial Services Index was included in the improving quadrant. This can lead to a phase of relative performance improvement. The media index is also in quadrant 1. However, it appears to have sharply given up its momentum relative to the broader Nifty 500 index.

Important note: RRG™ charts show the relative strength and momentum of groups of stocks. The above chart shows relative performance against the NIFTY500 index (broad market) and should not be used directly as a buy or sell signal.

Milan Vaishnav, CMT, MSTA

Consulting Technology Analyst

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