NIFTY Mildly Penetrates The 50-Week MA; Has Long Way To Go For Sustainable Up move
Updated: Jan 12, 2019
It was a volatile end to the week as the index oscillated in a 100-point range on Friday and finally settled with a modest loss after rebounding from the lower levels. Once again, just like the week before, no major downsides were seen, and the NIFTY managed to mildly pierce the 50-Week MA which is at 10748. After a limited oscillation in a defined range, the headline index NIFTY50 ended with modest gains of 67.60 points (+0.63%) on a weekly basis.
Markets continue to remain poised at a critical juncture. Despite exhibiting buoyant undercurrents, it continues to struggle while attempting to move past the important level of 10940 which is a lower top created couple of weeks back.
We expect a neutral start to the week and NIFTY is expected to inch higher if it manages to move past few critically important levels on the daily charts.The coming week is likely to see the levels of 10900 and 10975 playing out as important resistance area. Supports will come in at 10710 and 10600 mark.
The Relative Strength Index (RSI) on the weekly chart is 50.5616; it continues to remain neutral against the price. Weekly MACD is bullish and it remains above its signal line. PPO is positive and remains in continuing buy mode. A black body emerged on candles. Given the present structure on the charts, it remains insignificant.
From the pattern analysis, it is observed that after forming the high of 11760 and subsequent corrective decline, the NIFTY has formed a lower top in the 10940-10950 zones. The index has mildly penetrated the 50-Week MA which is presently at 10748. NIFTY will have to move past this 10940-10950 are for a sustainable up move.
Overall, despite the markets exhibiting buoyant undercurrents, the coming week has potential to go on either side. It would be technically important for the markets to keep its head above 50-Week MA to avoid any weakness.
Given the overall technical structure and considering the F&O data, we are unlikely to see any significant structural downsides. We suggest continuing to make select purchases during this period of consolidation. However, unless 10950, which is also a major pattern resistance on the daily chart is breached on the upside, profits must be vigilantly protected at higher 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.
The study of the Relative Rotation Graphs (RRG) show some interesting technical developments taking place. The key sectors like NIFTY Next 50 (NIFTY Jr), BankNIFTY, Nifty MidCap, Infrastructure and Financial Services index have shown distinct signs of slowdown in momentum and possibility of some consolidation in these groups. The Consumption and PSUBank Indexes are the only two groups which remain firmly placed in the leading quadrant while keeping its momentum intact. These groups are likely to relatively out-perform the broader markets.
The Realty Index and the Auto Index remain in the improving quadrant and they are also seen consolidating their positions and improving their relative momentum against the general markets.
The NIFTY PSE, Metal, and FMCG index are not likely to put up any eye-catching show. However, ENERGY, Pharma and IT Indexes are seen attempting to stabilize and are likely to put up stock specific performances in the coming week.
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 Member: (MTA, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)