While continuing to resist key resistance points on both the weekly and daily charts, the headline index closed with a net weekly gain of 134.05 points (-0.78%).
On the daily charts, Nifty has resisted the 100-DMA and 50-DMA. On the weekly charts, it has failed to breach the 20-week MA, which currently stands at 17,293. For the coming week, the options data suggests a probable trading range of 17,000-17,500 as these points include the max Put OI and the Call OI respectively.
In other words, the markets will continue to consolidate and fluctuate in this zone. A directional bias is only identified if Nifty moves above the 17,500 or dips below the 17,000 levels.
There will be no sustainable trend movement in the current zone. Just like last week, the 17,000-17,500 zone needs to be critically watched. Over the next week, the 17,350 and 17,500 levels are likely to act as potential resistance points.
Supports come in at 17,000 and 16,835 levels.
The weekly RSI is 50.85. It remains neutral and shows no deviation from the price. The weekly MACD is bearish and remains below the signal line. A small black body appeared on the candles; apart from this no other formation was noticed.
The pattern analysis suggests that the 17,000 levels are in good support area. This is also supported by the option data. Apart from this, Nifty is seen clinging precariously to a supportive trendline. This trendline is drawn from the levels of 15,431 and joins the subsequent higher highs and extends itself. The index has also failed to break through the 20-week MA, which may also serve as resistance on a closing basis.
The markets will remain in a trading zone as long as it stays between 17,000-17,500 and no directional bias can be expected until Nifty is between these two levels.
A firm directional bias will only be established if Nifty moves past the 17,500 or dips below the 17,000 levels. Until this happens, any moves towards 1.7500 will trigger corrective selling pressure from higher levels.
The 17,000 levels are the potential support due to the 200-DMA standing at 17,036. So, until one of the sides, above or below, is knocked out, it is highly recommended to use all the moves on the top to protect the gains at higher levels.
While leverage remains at very modest levels, a very cautious view is advised for today.
In our look at Relative Rotation Graphs®, we compared several sectors with CNX500 (Nifty 500 Index), which represents over 95% of the free float market capitalization of all publicly traded stocks.
The analysis of relative rotational charts (RRG) shows that convenient energy, commodities and the metals indices are firmly placed in the leading quadrant.
These groups will continue to outperform the broader markets relatively. The Nifty Bank, PSU Bank and the PSE indices are also in the leading quadrant, but they appear to be consolidating as they lose relative momentum.
The Auto Index has rolled within the weakening quadrant. Useful media and
Infrastructure indices are also in the attenuation quadrant. The Nifty MidCap 100 Index is languishing in the lagging quadrant. Nifty IT, Consumption and Nifty Realty indices are also in the lagging quadrant, but they seem to be improving on their relative front.
The Nifty Financial Services Index is in the improving quadrant. But it is seen to give up its relative momentum and it is seen to move towards the lagging quadrant. Other than that, the Nifty Pharma and FMCG index are in the improving quadrant and are expected to put on a resilient show in the coming week.
Important Note: RRGTM charts show relative strength and momentum for 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 technical advisory analyst and founder of EquityResearch.asia and ChartWizard.ae based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)