INSUBCONTINENT EXCLUSIVE:
The week gone by was much better than expected for the market, as the benchmark Nifty50 index ended on a strong note
The week remained technically important as Nifty was able to move past its 50-week moving average after facing resistance at that level for
The index ended the week with net gains of 350 points, or 3.32 per cent, on a weekly basis.
For the month, the market ended with a gain of
490 points or 4.72 per cent.
As we step into December and the fresh week, the market behaviour against the 50-week MA, which is currently at
10,739, will be important
If the market can defend this level, we may see it head towards the 11,000-11,200 zone.
On Monday, the market is expected to see a quiet
We see the possibility of some consolidation initially, but the undercurrent is likely to remain positive as long as the 50-week MA is not
broken on the downside.
The relative strength index or RSI, on the weekly chart, stood at 52.1675 and it remains neutral, showing no
divergence against the price
The weekly MACD remains bearish and it trades below the signal line
A white body candle has emerged
And apart from this, no major formations were seen on the candles.
Pattern analysis on the weekly charts threw up some technically important
After pulling back from the 100-week MA and the 10,000-mark, which also happens to be an important pattern support for Nifty, the index
faced resistance and halted its pullback near the 50-week MA
It has faced resistance at this level for seven weeks, but has now penetrated it to move higher
If this strength survives, Nifty will test the 11,000-11,200 levels
However, this level will be one of the most important resistance patterns
It is the lower end of the 30-month-long upward rising channel, which the index breached on the downside in the first week of October 2018
This is likely to pose a stiff resistance to the index going ahead.
All in all, if the market successfully defends the 50-week moving
average and attempts to inch higher, staying invested in a strategic manner will make more sense
Exposures should be focused more on defensives and on sectors that are rotating favourably.
If Nifty slips below the 50-week MA, we will see
it getting pushed into some consolidation once again, though the undercurrent remains positive.
In a look at the Relative Rotation Graphs,
we compared various sectors against CNX500, which represents over 95 per cent of the free float market-cap of all listed stocks
A study of the RRG shows services sector stocks have moved back into the leading quadrant
Along with this, financial services and bank Nifty index are inching higher in the leading quadrant.
These sectors are set to relatively
outperform the broader market in the coming weeks
Along with this, the realty pack has crawled into the improving quadrant after a long under-performance after improving its relative
With the realty pack, a strong improvement in the relative momentum was also seen in PSU banks, Nifty Mid50, Nifty Junior (Nifty Next50),
media, consumption and FMCG stocks
These groups are set to improve their relative performance against the broader market
On the other hand, no major performance is expected from auto and energy indices
Pharma and IT indices are seen drifting lower in the weakening quadrant and apart from stock specific performance, no major show on weekly
basis is expected.
Important Note: The 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 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)
