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D-Street week ahead: Trading range may expand, stay stock-specific

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NEW DELHI: The week gone by fared better than the previous one, with the NSE barometer Nifty50 settling the truncated week up 171.90 points, or 1.58 per cent, at 11,035.40. Most gains for the index came in the first three sessions, as the index consolidated in the latter two.

The index, which was deliberating around its 50-week moving average (MA) for over 15 weeks now, attempted to inch higher. But, it is concerning to see divergent signals on the daily and weekly charts.

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While the index attempted to move out of the 15-week old congestion zone on the weekly chart, it looked weary at higher levels on the daily chart. It looks prone to consolidation in the immediate short term.

One may expect a stable start to the week. However, given the present structure on the daily chart, consolidation is likely, at least in the beginning of the week.

Nifty50 may resist to take out 11,110 level. In an event of consolidation, the 50-week MA, which stood at 10,826 on Friday, will come in to lend support to the index.

Overall, in the coming week, expect index to find resistance around 11,110 to 11200 levels. Supports should come in at 10,826 and 107,00 levels.

The trading range for the coming week might be wider than usual.

Among key indicators, the weekly RSI stood 55.9864. It has marked a fresh 14-period, which does not show any divergence against the price, so far.

The weekly MACD continues to trade above its signal line. Apart from a white body that emerged on the weekly candle, no significant formations were observed for the week.

The pattern analysis of the weekly charts shows the index is attempting to move out of

the 15-week old congestion zone. Nifty50, though, has not moved out of that zone comprehensively. It needs a lot of efforts before, it breaks out from the zone.

All and all, though the index looks comfortable on the weekly charts, it is showing signs of slowing down on the shorter time frame charts.

We expect this indecisive mood of the markets to persist in the coming week. The index may remain vulnerable to selloffs. The profit taking bouts may increase as the volumes over past couple of days have remained lower than average. The market breadth too, is seen not as strong as it should be.

We suggest remaining selective while approaching the market as good performance is likely to remain limited in only select pockets of stocks.

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While reviewing Relative Rotation Graphs (RRG), it is evident that the Nifty IT and Nifty Energy indices will continue to outperform the broader market, as they are seen strongly advancing and remaining in the leading quadrant.

Relative Rotation Graphs compare various sectors against Nifty 500, which represents over 95 per cent the free float market cap of all the stocks listed.

Our study suggests that the Nifty 100 index is also crawling in the leading quadrant, but not moving much. This group may not distinctly outperform but may help in keeping the deterioration of market breadth into check.

Besides, the Nifty Pharma, the Nifty PSE and the Nifty Metal indices are seen continuing to see improvement on the momentum front.

These groups are expected to post resilient performance in the coming week. The Nifty Realty index is also seen attempting to enter the leading quadrant. It will need improvement in its relative momentum to put up with the expected out-performance against the broader markets.

Lastly, groups like Bank Nifty, Infrastructure, Nifty Mid50, Auto, Financial Services, Consumption, FMCG and PSU Bank are seen losing momentum.

Important Note: RRGTM charts show the relative strength and momentum for a group of stocks. In the above chart, they show relative performance as against Nifty 500 Index (Broader Market). They should not be used directly as buy or sell signals.

[“source=economictimes.indiatimes.”]

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