Coming week to remain volatile; moving past important overhead resistance important for NIFTY

Coming week to remain volatile; moving past important overhead resistance important for NIFTY

The equity markets did not have a smooth sailing as the previous week remained quite volatile, and the markets oscillated both ways to finally end the week in the red. The benchmark index NIFTY50 had moved past its 50-Week MA, but it has failed to sustain above that level. On weekly basis, the index ended with net loss of 183.05 points (-1.68%).

The coming week is set to remain action packed and the trade set-up is almost like a double-edged sword. If we look at the set-up solely from technical angle, markets have significant number of shorts in the system. The Friday’s trade saw lot of short being covered, and also fresh longs were added which usually indicates continuation of the uptrend that we saw on Friday. On the other hand, it would be the results of the key State Elections that will dominate the markets, and which will have its own sentimental impact. More so, with reference to the coming Loksabha elections in 2019. Any negative outcome for the BJP will not be taken favorably by the markets.

While reacting to Exit Polls, which forecast a fierce contest, markets are likely to see a shaky start to the trade on Monday. We will see the Markets finding resistance at 10940 and 11010 while supports will come in at 10570 and 10480 zones. The range is likely to be wider in coming week and volatility too, is likely to remain embedded in the trade.

The weekly RSI is 48.5600 and it remains neutral showing no divergence against the price. The weekly MACD is bearish as it continues to trade below its signal line. No significant formation is seen on Candles.

Pattern analysis on the Weekly charts show that NIFTY has stalled its pullback while resisting to the 20-Week MA. In the process, NIFTY has once again drifted below the 50-Week MA which is presently at 10743. Importantly, if the NIFTY is not able to move past the level of 10940 in coming days, it can potentially mark a lower top at that level.

The Exit Polls forecast a close finish for the State Elections, and this is set to keep the markets volatile. Slightest of the negative outcome for BJP is likely to dent the sentiment of the participants. The results of the current State Elections and BJP’s performance will also be read keeping the 2019 Loksabha elections in view. Given the structure of the Charts, we continue to recommend guarding profits at higher levels. Even with the positive election outcome, the overhead pattern resistances will ensure that there will be no smooth sailing for the markets. All upsides should be used to protect profits. Downsides, if any, should be used in making defensive purchases on moderate levels.

 In our look at Relative Rotation Graphs, we compared various sectors against CNX500, which represents over 95% the free float market cap of all the stocks listed.

Study of the Relative Rotation Graphs (RRG) shows that PSU Banks and Service Sector Index have also entered the leading quadrant and joined the Bank Nifty and Financial Services Index which is heading even higher on strong relative momentum. These four groups are set to show strong relative out-performance against the broader markets. Infra Index has also entered the leading quadrant and it is set to join the group of relative out-performers against the broader markets. The Realty index, along with Media, Consumption and MidCaps have continued to show improvement in their relative momentum. Energy and IT Stocks have continued to lose momentum and they have moved lower in the weakening quadrant. Auto stocks have attempted to consolidate, and this might result into some stock-specific isolated performance from this group. Metal stocks have shown slowdown in momentum. The broader index like CNX100 and CNX200 too remain in the weakening quadrant and this is likely to adversely affect the breadth of the market.

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst
 (MTA, USA / CSTA, Canada / STA, UK)  | (Research Analyst, SEBI Reg. No. INH000003341)
Tel: +91-70164 32277  | |

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