Dalal Street Week Ahead: Will the bulls keep charging or will they pause to take a breather?

The market traded last week on the lines analyzed. Although the market did not see a significant upward trend, the overall trend was expected to remain the same. In line with these expectations, Nifty ended the week on a somewhat positive note, trading within a defined range. The scope of the transaction was also limited. The index oscillated in a range of 492.65 points. Volatility is slightly higher. India Vix rose 1.75% to 15.23. The headline index closed with a net weekly gain of 126.05 points (+0.57%).

There was a short trading session on Saturday. However, despite Friday’s strong close, the market continues to face the same resistance levels as last week. Looking at options data, the resistance level has moved slightly higher. However, despite the new highs, the market is once again set to consolidate towards current levels or even higher. In the current technological framework, focus and attention are essential, emphasizing the need to protect interests at a higher level. It will be important not to blindly chase uptrends, but rather protect profits at a high level and cycle stocks and sectors appropriately.

Over the next week, the 22400 level will continue to remain an important resistance level followed by 22650. Support lies at the 22050 and 21850 levels. Trading ranges are expected to be a little wider than usual next week. The possibility of some increase in volatility cannot be ruled out.

Weekly RSI is 73.58. Although it remains in a slightly overbought area, it remains neutral with no difference in price. Weekly MACD remains positive and above the signal line. However, the narrowing of the histogram suggests that a negative crossover is likely in the coming days.

A candle with a long lower shadow occurred. This is not a classic Hanging Man form, but it certainly suggests a lack of consensus among market participants at a higher level. Pattern analysis of the weekly charts shows that the breakout that occurred after the Nifty crossover above the 20800 level is fully intact. strength. However, the current price action over the past few weeks shows that the upward momentum is slowing and the market is lacking consensus among market participants. The widening Bollinger Bands have also seen increased volatility over the past few weeks. This expansion may cause the trend to slow and the market to consolidate. Overall, we expect the market to rise slightly, but we may not see runaway moves on a weekly basis. It is more likely that the market will find resistance at higher levels. It becomes important to place equal or greater emphasis on protecting interests at higher levels. It is advisable to continue to focus on sectors such as FMCG, consumer, pharmaceuticals etc where their relative strength compared to the broader market is improving. A cautious and selective approach is recommended in the coming weeks.

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.

Relative Rotation Graph (RRG) shows that Nifty Commodities, IT, PSE and Metal indices are slowing down and losing relative momentum as they remain in the broader market. Commodities, PSU Banks, Pharmaceuticals, Infrastructure and Automobile indices are also present within the major quadrants. These groups will continue to outperform the broader market.

The real estate index also rolled back from the bearish quadrant to inside the leading quadrant. Apart from this, Nifty Midcap 100 index remains within the bearish quadrant. Nifty Banking, Media and Nifty Services sector indices continue to trend lower within the lagging quadrant along with Nifty Financial Services and FMCG indices. However, the consumer group is showing some improvement in momentum relative to the broader market.

There are no sectors inside the improvement quadrant.

(Important note: RRGTM 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 is a consulting technology analyst and founder of EquityResearch.asia and ChartWizard.ae.