After bouncing off its 100-week moving average in the previous week, the domestic equity market attempted to take some breather and stabilise this past week. Nifty was once again able to bounce back from its 100-week MA, and this pullback was aided by the market’s oversold nature seen on the short-term charts.

After an initial slip, Nifty kept its head above the 100-week moving average, which currently stands at 10,861 and ended with weekly gains of 112.30 points, or 1.02 per cent.

The coming week will be a truncated one with just three trading days, as August 12 and 15 will be trading holidays on account of Eid and Independence Day, respectively. The market is likely to consolidate in the coming week amid rangebound trade without making much headway on either side and oscillate between the 50-week and 100-week moving averages.

The short-term technical charts have seen Nifty bounce back 250-odd points from the recent low. However, higher timeframe charts confirm and show that this may be just a technical pullback and not a trend reversal, which is what is required for a confirmation to emerge in the coming days.

The coming week will see Nifty face resistance at 11,180 and 11,250 levels, while supports will come in at 11,910 and 11,800 levels. The weekly RSI stands at 42.3355. It remains neutral and does not show any divergence against price.

The MACD continues to remain bearish as it trades below the signal line. A white body has occurred on the candles. Its emergence near the support area of the 100-week moving average lends some credibility to the support area represented by this MA.

READ  Buzzing stocks: Suzlon Energy, RIL, TCS, REC, NALCO

Pattern analysis makes it evident that Nifty had a technical pullback given the oversold condition on the short-term charts. The index breached the secondary rising channel on the higher timeframe charts, and witnessed a similar pullback on the weekly charts as well.

The market is not expected to make any significant directional move in the truncated week ahead. A range-bound oscillation is what is more likely, and we will see some sector-specific defensive plays unfold in the market. The reversal that we saw in the previous two sessions can be a mere technical pullback, and it would be prudent to wait for a temporary confirmation of a bottom before building up larger directional bets.

In our look at the relative rotation graphs, we compared various sectors against CNX500 (Nifty500 Index), which represents over 95% of the free float market capitalisation of all the listed stocks.

A review of relative rotation graphs (RRG) reflects a defensive market setup. Despite remaining in the leading quadrant, Realty, Services, Infrastructure and Financial Services Indices are seen sharply giving up their relative momentum compared with that in the broader market, Nifty500 index.

Giving them company in losing relative momentum are Bank Nifty, Nifty MID50, Auto, Metals, CPSE, PSE and PSU Bank indices which are placed at different places on the RRG. All these indices are slowing down at this point. We will see a relative outperformance compared with the broader market from FMCG and consumption stocks which are seeing a steady improvement in their relative momentum. The IT pack is sustaining its upturn and seeing a sharp improvement in relative momentum. Some sporadic and isolated stock-specific performance can be expected from Media and Pharma packs.

READ  Oak Valley Bancorp reports Q1 results

Capture 1
Weekly market outlook


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 Nifty500 Index (broader markets) 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)





READ SOURCE

WHAT YOUR THOUGHTS

Please enter your comment!
Please enter your name here