The Indian equity market had technically important week in many ways during the seven days gone by. The benchmark Nifty50 index ended the week on a buoyant note, gaining 246.25 points or 2.29 per cent on a week-on-week basis. The previous week was also technically important, as the index faced resistance at the falling trend line that emerged from the 11,170 level, which joined the subsequent lower tops.
During the week gone by, the Nifty50 saw a breakout from this pattern resistance, which had halted the upward move during the past couple of months.
The coming week is set to be very important. Given the slightly overstretched nature of a few indicators on the daily charts, the Nifty50 might consolidate a bit in a capped range.
Once done, it is set to confirm further breakout on the weekly charts. We expect a quiet start to the week. The initial week may see some consolidation in the market, but the second half may see the Nifty50 attempt to inch higher. In the event of any minor corrective decline, defending the 10,800 level will be of critical importance.
In the coming week, the 11,100 and 11,175 levels should emerge as immediate resistance for the index. Supports should come in at 10,910 and 10,835 levels.
The weekly RSI stood at 64.6543 and it has marked a fresh 14-period high, which is a bullish indication. The RSI does not show any divergence from price, but it has broken out of a pattern formation and is inching higher. The weekly MACD remained in buy mode, as it traded above the signal line.
Pattern analysis showed the Nifty had stalled its upward move after marking a high of 11,170. From that level, the Nifty50 has marked a lower top and it faced resistance at the falling trend line from 11,170, which joined subsequent lower tops.
Overall, the Nifty50 has seen an upward breakout from the falling trend line pattern resistance. This requires confirmation on the following bar. Given the slightly overstretched indicators on the daily charts, we might see some deliberation before a confirmation is seen and the Nifty resumes its upward move.
Minor consolidation within a capped range is not ruled out, but eventually the 50-pack is likely to inch higher towards its lifetime high as long as it defends the 10,800 level. Overall, a positive outlook is advised for the coming week.
A study of Relative Rotation Graphs showed the energy pack has strengthened itself once again after a dismal performance in the previous week. It has improved its relative momentum and is likely to improve further. PSU banks, too, are expected to put up a good show during the coming week. The Bank Nifty and financial services packs remain in the leading quadrant and are likely to relatively outperform the broader market.
FMCG, too, remains in the leading quadrant but is rapidly weakening on the momentum front. Broader market indices like CNX100, 200, 500, Nifty JR, and the midcap universe have shown no sign of improvement. This suggests Nifty will have to rely on the frontline stocks to see any bounce.
The realty and infrastructure packs might see isolated outperformance. The IT pack, too, is likely to show stock-specific performance. Pharma is likely to improve on the momentum front. No major breakthrough is expected from the metals and media packs, though stock-specific movements may be seen.
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.