Stock Analysis, IPO, Mutual Funds, Bonds & More

Dalal Street week ahead: Market in uncertain zone, protect profit on every rise

The 10,900 and 11,130 levels are likely to pose resistance on the upside.

Jan 26, 2019, 04.47 PM IST
Defying expectations, Nifty did not take any major directional call during the week gone by. The week remained volatile with the index oscillating in a defined 230-point range throughout. However, on the weekly charts, the index has been able to keep its head above the 50-week moving average, which is at 10,757. On a weekly basis, the market gave up all its earlier week’s gains, as it ended 126 points (-1.16 per cent) down.

The coming week is set to remain eventful with the expiry of current derivative series on Thursday, followed by the presentation of the Interim Budget on Friday. There are expectations that this Interim Budget is likely to be like a full-fledged budget with general elections just a couple of months away.

Given the events that the market will face in the coming week, the volatility will have its obvious presence felt and this may keep the range for Nifty wider than normal.

The Indian market relatively underperformed its Asian and other global peers in the previous week. Since Nifty has kept its head above the critical support levels and with global markets stable and positive, we can once again expect a stable start to the new week. The 10,900-10,950 zone will continue to remain an important one that Nifty will have to move past for any meaningful and sustainable upward move.

With a stable start to the week, the 10,900 and 11,130 levels are likely to pose resistance on the upside. Downsides, if any, will find support at 10,700 and 10,650 mark.

The weekly RSI is at 49.9822; it remains neutral and shows no divergence against price. The weekly MACD remains bullish as it trades above its signal line; additionally, PPO too remains positive. A small engulfing bearish candle has emerged. The size of the candle is much smaller than usual, but it may potentially set some base for a bullish reversal since it has emerged near the support area. However, this needs confirmation on the next bar.

On close examination of the weekly charts, it is observed that Nifty is consolidating around its 50-week moving average for over eight weeks now with higher than normal volumes. If this is read along with the narrowed trading band on the daily chart, it becomes more than evident that the market is now overdue for a directional move on either side.

As the market awaits triggers, we suggest not the chase the upsides blindly unless a decisive move beyond the 10,950 mark is made. Unless this happens, all upward moves should be used to protect profits at higher levels. Purchases, if any, should be kept strictly stock specific and modest. A cautious approach is suggested for the week ahead.


In our look at Relative Rotation Graphs, we compared various sectors against CNX500, which represents over 95 per cent the free float market cap of all the stocks listed. In the study of Relative Rotation Graph (RRG), it is observed that most of the indices like financial services, infrastructure, Bank Nifty, NiftyMid50, consumption and PSU banks are seen taking some breather and slowing down while mildly losing their momentum against the general markets.

These groups are expected show milder performance unless given some triggers and will be seen consolidating its position. On the other hand, the FMCG pace has reversed its way back into the leading quadrant.

Along with this, a sharp improvement in momentum is seen in the Energy Index along with the IT index. CNX pharma, too, is seen bettering its relative momentum. These packs are expected to be collectively seen improving their performance against the broader market even while they remain in the lagging quadrant.

The auto pack appears to be faltering again and sharply losing its momentum even though it remains in the improving quadrant. Though some stock specific gains can be expected from the Realty pack, no major show is expected from the CNXPSE, CNXMID and CNX Media indexes 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 as against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service