Nifty is is continuing to scale newer highs amid intermittent consolidation and may keep doing so.
After many range-bound oscillations in the previous week, the benchmark Nifty 50 ended this week with a small uptick as it ended with net gains of 122.40 points, or 1.16 per cent. Most of the entire previous week was spent by the market consolidating in a defined range after it achieved its breakout from the 10,490 zone.
In the coming week, we might see it continuing to trade in a defined range with an upward bias. As indicated by F&O data, the Nifty is likely to advance to test its 24-month rising trend line, following which it might see some corrective moves. The possibility of the Nifty testing levels of 10,750-10,800 cannot be ruled out though it may do so amid intermittent minor correction.
The coming week will see the levels of 10,750 and 10,835 acting as possible resistance on the upside. Supports are likely to come in at 10,600 and 10,535 levels.
The Relative Strength Index - RSI on the Weekly Chart - is 68.8730. A Bearish Divergence is observed as the Nifty formed a fresh 14-period high while the RSI did not. Weekly MACD is bullish as it trades above its signal line. A Rising Window occurred on Candles. This is essentially a gap and often results in continuation of an upmove.
The pattern analysis shows that the upmove in the Nifty remains securely in place. It is continuing to scale newer highs amid intermittent consolidation and may keep doing so. However, around the 10,800-mark, it may face very stiff resistance to its 24-month long upward rising trendline.
Overall, if we take an immediate short-term week for the next 2-3 weeks while we approach the Union Budget, by that time, we may see some run-up continuing. However, in great likelihood, the market will not disregard the serious resistance of the 24-month long trendline that it will approach in the process.
We recommend that while making select purchases with each consolidation or minor correction that we witness, the upmoves should also be utilised in realising profits at higher levels and lightening the portfolios as we approach the 10,800-mark. Any moves following that should be made to rebalance the portfolios or reallocate the trading positions.
A study of Relative Rotation Graphs - RRG - shows that PSU banks are evidently slowing on momentum on a weekly note. We will continue to see media, realty and auto, along with NIFTY Next 50, attempting to outperform the markets. Service sector stocks, along with FMCG, are trying to consolidate their performance and may continue to do so in the coming week as well.
Pharma has been underperforming over the past several weeks and may remain an underperformer on a weekly basis. Metals and Mid-cap Universe, along with IT, may witness stock-specific outperformance against the general market.
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)
