After attempting a breakout from the 10,490 level and suffering a throwback later, the benchmark Nifty50 index ended the calendar year on a positive note on Friday. However, the weekly gains remained modest with the index rising only 37 points or 0.36 per cent on a weekly basis.
The market witnessed lot of oscillation in a capped range and attempted to move out from an area of stiff resistance.
On Monday, we expect the market to usher in the New Year and a new week on a positive note. There are chances that we would see a positive opening and the market would positively consolidate with an upward bias.
If the market inches higher in the coming week, it may test the 24-month-long rising trend line going ahead.
The 10,590 and 10,675 levels will play out as immediate resistance for the market. Supports will come in at 10,410 and 10,350 levels. The Relative Strength Index or RSI on the weekly charts stood at 65.6170. A bearish divergence persists on the weekly RSI as the Nifty has set a fresh 14-period high, while the RSI has not done so.
The weekly MACD stays bearish even as it trades below the signal line. A Spinning Top has occurred on the candles, signalling indecisive and a tentative mood among the market participants.
Pattern analysis shows in the event of the market attempting an upward move, there are chances that the indices would face resistance at the 24-month-old rising trend line, as evident from the charts. There are possibilities that the market may inch higher, and there are equal possibilities that the market may face stiff resistance in that area at higher levels.
Overall, the week is likely to start on a quiet to mildly positive note and the Nifty50 may attempt to inch higher and confirm the breakout again after suffering a throwback. We reiterate maintaining a stock-specific view as pockets of selective performance is likely to dominate market action.
While avoiding shorts completely, we would advised protecting profits vigilantly at higher levels and continue select purchases.
A study of the Relative Rotation Graph, or RRG, shows the auto pack has significantly gained relative strength and momentum and is likely to outperform relatively. Midcap, Media and PSU bank stocks along with Nifty Next 50 will also join this relatively outperforming league of indices. Metals and Pharma stocks are clearly losing momentum on a weekly basis and the index may not perform much despite stock-specific performance.
Energy, too, is seen losing sheen compared with other sectors.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance against the 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 [email protected])
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