A week ago: NIFTY took a breather after a seven-week uptrend. What can we expect next? | India Analysis

In a previous technical note, we asserted that given the market’s continued upward trend, it has risen almost vertically. This causes the index to deviate significantly from its mean, making it prone to overextension and violent profit taking. The market consolidated during the week, but the daily chart showed strong mid-week gains. The index was seen trading in a range of 616.20 points. Following seven consecutive weeks of gains and very choppy trading over the past five sessions, the headline index ended the week slightly lower by 107.25 points (-0.50%).

Next week is a short week with Monday off. christmas. The month has remained strong so far with Nifty rising 6.04%. Next week will see the end of the week, month and year. There has been some jitters on the daily charts, but the market continues to remain overextended on a weekly basis as it moves well ahead of the curve. The 20-week MA remains 1500 points below the current level, while the 50-week MA remains up to 2472 points below the current level. These kinds of sharp deviations from the average and excessive extensions on the charts will cause the market to continue to take sharp and volatile profit-taking at current levels and even higher levels. Volatility has soared. India Vix rose 4.42% on a weekly basis to 13.71.

The market will open quietly next week and may be prone to some corrective pressure. The 21490 and 21600 levels act as immediate resistance points. Support is provided at the 21100 and 20950 levels.

Weekly RSI remains at 73.71. It hit a bullish new 14-period high. However, it remains in the overbought range and remains neutral, showing no difference compared to the price. The weekly MACD remains bullish, hovering above its signal line.

all top It happened by candlelight. These formations appear when there is little difference between open and closed levels. This indicates indecisive behavior of market participants. Such a formation could potentially indicate a reversal. However, confirmation is also required.

Pattern analysis of the weekly charts shows that Nifty continues to remain above the rising channel after attempting a breakout last week. In the process, the index pushed up the resistance level to 21000, as per options data. As long as the index stays above the 21000 line, it will be within the upper consolidation range. However, if it slips below 21000, it will gradually weaken.

Overall, the approach to the market will be similar. If the market is on a gradual upswing, more emphasis and focus will be placed on booking and protecting profits rather than making new purchases. Assemblies must be used to protect interests. Every new purchase must be very specific and selective. It would be wise to focus more on pockets showing relative strength while refraining from excessive leverage exposure. A very cautious outlook is recommended for next week.

Next week’s sector analysis

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

The Relative Rotation Graph (RRG) shows a mixed setup, with many sectors rapidly giving up relative momentum while some sectors maintain strong rotation. The Nifty Commodities, Energy, Infrastructure, PSE and Real Estate indices are within the leading quadrant and may continue to outperform the broader market comparatively.

While remaining within the bearish quadrant, PSU Bank, Media, Pharma, Midcap 100 and Auto indices continue to trend lower. The Metal Index has shown rapid improvement in relative momentum.

The IT index showed rapid improvement in relative momentum while remaining within the lagging quadrant.

FMCG and consumption indices are within the improving quadrant. But they are rapidly giving up relative momentum. Banknifty and Service Sector indices also remain within the improving quadrant.

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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