market outlook: Dalal Street Week Ahead: Market likely to consolidate, range bound next week

Nifty had accumulated over 1,100 points in the two weeks prior to this one. There were clear signs of an impending consolidation at the time. Based on that analysis done, the index spent the last five sessions in a much tighter range as it attempted to consolidate at current levels. It oscillated in a range of 436 points and finally ended the week on a modestly negative note.

While continuing to resist key resistance points on the weekly and daily charts, the main index closed with a weekly net gain of 134.05 points (-0.78%).

On the daily charts, Nifty has resisted the 100-DMA and the 50-DMA. On the weekly charts, it has failed to break the 20-week moving average, which currently sits at 17,293. For the week ahead, options data suggests a likely trading range of 17,000 to 17,500, as these points have the highest Put OI and Call OI, respectively.

In other words, the markets will continue to consolidate and oscillate in this zone. A directional bias will be established only if Nifty moves above 17,500 or slides below 17,000 levels.

There will be no sustainable trending movement in the current zone. As in the previous week, the 17,000-17,500 zone is to be watched crucially. Next week the 17,350 and 17,500 levels are likely to act as potential resistance points.

Supports come at the 17,000 and 16,835 levels.

The weekly RSI is 50.85. It remains neutral and does not show any divergence against the price. The weekly MACD is bearish and remains below the signal line. A small black body emerged above the sails; Apart from this, no other formation was noticed.

Milan26.3ET TAXPAYERS

Pattern analysis suggests that the 17,000 levels hold a good support area. This is also supported by the options data. Aside from this, Nifty is seen precariously clinging to a supportive trendline. This trend line is drawn from the 15,431 levels and joins the subsequent higher highs and extends. The index has also failed to break through the 20-week moving average, which may also act as a resistance at the close.

Markets remain in a trading zone as long as it stays between 17,000 and 17,500 and a directional bias cannot be expected until Nifty is between these two levels.

A firm directional bias will be established only if Nifty breaks above 17,500 or drops below 17,000 levels. Until this happens, all moves towards 1.7500 will invite corrective selling pressure from higher levels.

The 17,000 levels are potential support due to the 200-DMA sitting at 17,036. Therefore, until either side, top or bottom, is eliminated, it is strongly recommended that all moves to the upside be used to protect gains at higher levels.

As you continue to keep leverage at very modest levels, a very cautious view is recommended for the day.

In our Relative Rotation Graphs® analysis, we compare various sectors against the CNX500 (Nifty 500 Index), which represents over 95% of the free float market capitalization of all listed stocks.

Milan23.33ET TAXPAYERS

Milan23,333ET TAXPAYERS



Relative Rotation Charts (RRG) analysis shows that the Nifty Energy, Commodities and Metal indices are firmly positioned within the main quadrant.

These groups will continue to relatively outperform the broader markets. The Nifty Bank, PSU Bank and PSE indices are also within the main quadrant but appear to be consolidating as they give up relative momentum.

The auto index has rolled into the weakening quadrant. ingenious means and

Infrastructure indices are also within the weakening quadrant. The Nifty MidCap 100 Index languishes within the lagging quadrant. The Nifty IT, Consumer and Nifty Realty indices are also within the lagging quadrant, but appear to be improving on their relative front.

The Nifty Financial Services Index is in the improvement quadrant. But he is seen giving up his relative momentum and is seen moving into the lagging quadrant. Apart from this, Nifty Pharma and the FMCG index are in the improvement quadrant and are expected to put on a strong show over the next week.

Important note: RRGTM charts show the relative strength and momentum of a group of stocks. In the chart above, they show relative performance against the NIFTY500 Index (broader markets) and should not be used directly as buy or sell signals.


(Milan Vaishnav, CMT, MSTA, is a Consultant Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be contacted at milan.vaishnav@equityresearch.asia)

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