In our previous weekly note, we had mentioned about the Nifty50 slipping below its 50-week moving average and highlighted the importance of this important weekly level. The first half of the week saw continued weakness in the market.

However, the middle of the week saw Nifty rebound after declining for eight consecutive sessions.

This pullback halted exactly at the 50-week moving average, which currently stands at 10,791.

The equity benchmark ended 67.25 points, or 0.63 per cent, higher at 10,791 on a weekly basis. The coming week will be as important as the previous week, as Nifty50 is yet to navigate the critical resistance levels on both daily and weekly charts.

On the daily chart, it trades below its 50 and 200 DMAs; while on the weekly chart, it is yet to move past its 50-week moving average after slipping below it. As evident from the chart, Nifty has been trading sideways in a defined congestion zone over past 14 weeks.

We expect the market to see a stable start in the coming week as Nifty is making an attempt to inch higher.

The coming week is expected to be more volatile, as we have expiry of the current derivative series. From a weekly point of view, moving past and remaining above the 10,790 level on a closing basis will be important for Nifty.

Unless this happens, it will remain vulnerable to bouts of selloff at higher levels. We expect the 10,850 and 10,990 levels to act as immediate resistance points for Nifty, while support should come in at 10,580 and 10,510 levels. The weekly RSI stands at 49.9193.

It remains neutral and shows no divergence against the price.

The weekly MACD remains bullish and trades above the signal line.

A candle with a long lower shadow has emerged.

In the current context, it remains less significant. Pattern analysis of the weekly charts shows Nifty is trading in a defined range, which has become a congestion zone for the market.

In the given situation, moving past the 50-week MA and sustaining above it will be of paramount importance for the market. Unless this happens, we will remain vulnerable to some weakness creeping in, which could change the contours of the market for the near term.

As of now, there is no structural damage on the charts and with the market breadth improving, we advise traders to refrain from creating shorts.

Rangebound moves in the market should be utilised to make select purchases and protect profits at higher levels. In our look at the Relative Rotation Graphs, we compared various sectoral indices against CNX500, which represents over 95 per cent the free float market capitalisation of all the listed stocks. While reviewing relative rotation graphs (RRG), we had mentioned the possibility of market breadth improving, as the broader CNX100 index has crawled in the leading quadrant.

In the previous week as well, CNX100 has advanced further in the leading quadrant and is being followed closely by the CNX200 index.

However, both the indices need their momentum to grow stronger to lend more potency to market breadth. This apart, the energy and IT packs remain firmly in the leading quadrant while improving their momentum.

These groups are likely to outperform the broader market.

The CNX Service index is likely to contribute to some relative outperformance as it remains in the leading quadrant.

Bank Nifty and financial services indices are steadily losing their momentum despite remaining in the leading quadrant. Nifty Auto, MID50, Nifty Next 50 (Nifty Jr), CNXMidcap and CNX Media indices are losing momentum.

These groups are likely to underperform the broader market on a relative basis.

Some slowdown was also seen in FMCG, consumption and infrastructure packs. While remaining in the lagging quadrant, pharma, metals and CPSE indices continued to improve in terms of relative momentum and are likely to strengthen their positions in the coming week. 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 Nifty500 index (broader market) and should not be used directly as buy or sell signals.