Over the past five sessions, markets have continued to rise as they strengthen in the process. And with the conviction of the move, the trading range also widened as expected. Against the trading range of 390.35 points the week prior to this, Nifty moved 610.05 points this week as it strengthened its move. While breaking some important levels, the overall index closed with net gains of 670.25 points on a weekly note. gradually higher. In the process, the index also broke above the 20-week MA which stands at 16580 levels. The most logical move is likely to take the markets to their 50 week MA which is currently placed at 17073. Even the options data suggests that the markets are reaching this and also taking a break as the OI call the higher is placed at this strike price.
However, that being said, it should also be noted that this cannot happen without a brief consolidation which is very likely to take place.
We are entering the expiration week of the monthly derivative series and the next few sessions are likely to remain dominated by refinancing-centric activity. The week ahead is likely to see the 16850 and 17000 levels act as potential resistance points. Support comes in at the 16550 and 16435 levels. The trading range will continue to remain wider than usual.
The weekly RSI is 51.69; it remains neutral and shows no divergence from the price. The weekly MACD is bearish and remains below the signal line. However, the histogram shrinks sharply; the coming week could see this indicator post a positive crossover.
A large white candle appeared on the charts. This reflects the directional consensus of bullish market participants.
The analysis of the models shows some technically important points. First, the Nifty has moved comfortably above the crucial 15700-16000 levels. This was the support that the index had violated on its way down; it then acted as resistance when the Nifty tried to move higher. Moreover, the Nifty also exceeded the 20-week MA. Some consolidation and expiry moves are likely, but in broader terms, it is more likely heading towards the 50-week MA which is placed at 17073 levels.
The general environment was stable; this was reflected in the volatility which further eased compared to the previous week. INDIAVIX fell 5.38% to 16.65. The coming week could see certain defensives like Pharma do well as well as certain financial pockets.
Apart from that, we are also likely to see laggards like IT also trying to catch up. Overall, the week ahead should remain very equity specific. It is recommended that all higher side moves be used more to protect profits at higher levels rather than continuing with a blind pursuit of the upward move. There may not be any major drawbacks on the cards, but booking profits from higher tiers cannot be ruled out.
In our analysis of the Relative Rotation Graphs®, we compared various sectors to the CNX500 (NIFTY 500 Index), which represents over 95% of the free float market capitalization of all listed stocks.
Relative Rotation (RRG) chart analysis shows that the Nifty Financials Index rolled inside the leader . It joins the Nifty Auto, Bank Nifty, FMCG and Consumption indices which are also placed in the main quadrant. We can expect these groups to continue to outperform the broader markets relatively.
The Nifty Infrastructure, PSE and Energy groups are heading lower in the weakened quadrant. The Midcap index while inside the lagging quadrant is seen trying to move back towards the leading quadrant.
The Nifty Commodities and Metal indices continue to languish inside the lagging quadrant. Media and IT indices are also in the lagging quadrant, but are seen struggling to improve their relative momentum against the broader markets.
This can lead to a specific outperformance of stocks in these pockets. The Nifty Realty Index is seen to be rotating firmly while placed inside the improvement quadrant. The Nifty Services Index also rolled inside the improving quadrant, hinting at the potential end of its underperformance phase against the broader markets.
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.