Dalal Street week ahead: Nifty may attempt a minor pullback
, ET CONTRIBUTORS|
Updated: Dec 02, 2017, 04.47 PM IST
During the week gone by, Indian equities remained weak as the benchmark Nifty index ended with a net weekly loss of 267.90 points or 2.58 per cent. The week gone by was by far one of the weakest in the recent past. In our previous weekly technical note, we had mentioned about the 10,346-10,365 levels, acting as major resistance to the markets.
We had also mentioned about the persistent bearish divergence of the lead indicators likely leading to weakness in the near term.
For the coming week, given the fact that shorts have started to get built up in the system, Nifty may attempt a minor pullback but in any case, significant rise is very less likely, at least in the immediate short term.
The 10,210 and 10,365 levels will act as immediate resistance for the Nifty50 in the coming week. Supports will come in at 10,050 and 9,910 levels.
The Relative Strength Index or Rs I on the weekly chart is 56.0154 and remains neutral against the price.
The weekly MACD has reported a negative crossover and it is now bearish while trading below its signal line. A Big Black candle that has emerged from near the 10,345, 10,365 levels has established the credibility of these resistance levels.
While having a look at pattern analysis, it is evident that the 22-month long trend line has posed serious resistance to the market. The lead indicatoRs, which otherwise remain neutral to the price, have continued to form lower tops while the market was attempting higher levels.
All this has cumulatively resulted into bearish divergence on the weekly charts. The lead indicators usually foretell the coming price action. It was expected since couple of weeks that some corrective actions were imminent in the immediate short term.
Now, when the markets are actually in a corrective mode, fresh short positions have started to resurface again. If we attempt to take a holistic view of the markets, such fresh shorts may start providing supports at lower levels and the markets may attempt some technical pullbacks.
However, in any given case, any significant up move is very less likely. Overall, next week will remain highly stock specific and it is recommended to keep overall exposures moderate and adopt a cautious view on the markets.
A study of Relative Rotation Graphs – RRG evidently show that the metal pack, which was showing leadeRs hip over past couple of weeks will now take a back seat and will continue to under-perform along with FMCG and pharma. Relative out-performance will now be expected from the midcap universe assisted with sectors like PSU banks, public sector enterprises, infra and some select stocks from realty. Autos are likely to continue to consolidate. Media pack will continue to gather strength and may remain resilient in event of general Market weakness.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance as against Nifty Index and should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
We had also mentioned about the persistent bearish divergence of the lead indicators likely leading to weakness in the near term.
For the coming week, given the fact that shorts have started to get built up in the system, Nifty may attempt a minor pullback but in any case, significant rise is very less likely, at least in the immediate short term.
The 10,210 and 10,365 levels will act as immediate resistance for the Nifty50 in the coming week. Supports will come in at 10,050 and 9,910 levels.
The Relative Strength Index or Rs I on the weekly chart is 56.0154 and remains neutral against the price.
The weekly MACD has reported a negative crossover and it is now bearish while trading below its signal line. A Big Black candle that has emerged from near the 10,345, 10,365 levels has established the credibility of these resistance levels.
While having a look at pattern analysis, it is evident that the 22-month long trend line has posed serious resistance to the market. The lead indicatoRs, which otherwise remain neutral to the price, have continued to form lower tops while the market was attempting higher levels.
All this has cumulatively resulted into bearish divergence on the weekly charts. The lead indicators usually foretell the coming price action. It was expected since couple of weeks that some corrective actions were imminent in the immediate short term.
Now, when the markets are actually in a corrective mode, fresh short positions have started to resurface again. If we attempt to take a holistic view of the markets, such fresh shorts may start providing supports at lower levels and the markets may attempt some technical pullbacks.
However, in any given case, any significant up move is very less likely. Overall, next week will remain highly stock specific and it is recommended to keep overall exposures moderate and adopt a cautious view on the markets.
A study of Relative Rotation Graphs – RRG evidently show that the metal pack, which was showing leadeRs hip over past couple of weeks will now take a back seat and will continue to under-perform along with FMCG and pharma. Relative out-performance will now be expected from the midcap universe assisted with sectors like PSU banks, public sector enterprises, infra and some select stocks from realty. Autos are likely to continue to consolidate. Media pack will continue to gather strength and may remain resilient in event of general Market weakness.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance as against Nifty Index and should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
