WEEKLY MARKET OUTLOOK FOR AUG 06 THRU AUG 10, 2018 - - Broader set-up intact; NIFTY remains susceptible to consolidation at higher levels

WEEKLY MARKET OUTLOOK FOR AUG 06 THRU AUG 10, 2018 - - Broader set-up intact; NIFTY remains susceptible to consolidation at higher levels

The previous week traded much on the expected lines. It was expected that the NIFTY is likely to extend its gains but will do so with some intermittent consolidation and corrective bouts. In line with this analysis, after trading in an extremely capped range, the NIFTY ended the week with modest gains of 82.45 points or 0.73%. Bulk of the gains came from the Friday’s trade as until that day, the NIFTY was trading in the negative on the Weekly basis.

About the coming Week, it remains distinctly evident that the NIFTY’s set up is buoyant and it is moving towards its upper range of the 30-month old upward rising channel. As we approach the coming week, we will have to keep in mind that the NIFTY trades overbought now on Weekly basis as well. With some indicators remaining slightly overstretched, we will continue to see intermittent consolidation happening at higher levels. Apart from this, the broader set up remains intact.

In event of any consolidation or throwback happening, we will see supports coming in much lower at 11170 and 11120 zones. On the higher side, resistance can be expected at 11410 and 11535 zones.

Weekly RSI on the Charts stand at 71.5428. It has marked a fresh 14-period high which is bullish. It does not show any divergence against the price. Weekly MACD stays bullish while trading above its signal line. Apart from a small white body that occurred on Candles, no significant formations were observed.

If we look at pattern analysis, the NIFTY continues to remain firmly within the 30-month old upward rising channel and is moving towards its upper range.

On the Weekly Chart, the NIFTY has ended above its upper Bollinger band. This fairly indicates that the upward move is likely to continue. However, given the overbought nature of the Markets on both Daily and Weekly time frames, some consolidation at higher levels remain imminent. However, this consolidation, when it occurs, will remain extremely healthy for the Markets. We reiterate avoiding aggressive exposures but to make select purchase with each dip that expected volatility may offer. While maintaining a buoyant outlook, caution is advised at higher levels as NIFTY remains susceptible to volatile profit taking bouts.

A study of Relative Rotation Graphs shows that the laggard sectors and indices of the previous weeks have continued to improve on relative momentum front. Broader Indices like CNX 100, CNX200 and CNX500 are seen continuing to improve their relative momentum when benchmarked against NIFTY. Also, NIFTY Next 50 (NIFTY JR), AUTO, NIFTY MIDCAP 50, CNXMID, Small Caps and Public Sector Enterprises (PSE) are also seen arresting their slides and attempting to improve on the relative momentum. PHARMA and ENERGY has continued to put on weight and improve their performance over the week and are expected to continue to do so in coming week as well. We are also expected to see resilient performance from the PSU Banks as well. FMCG and Financial Services are still in the leading Quadrant but are seen losing momentum. We will see stock specific performance coming in from REALTY, IT and Metal packs.

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 NIFTY Index and should not be used directly as buy or sell signals.

Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst

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