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Dalal Street week ahead: Nifty likely to take decisive call next week, but stay light

We expect the levels of 10,950 and 11,300 acting as immediate resistance levels.

Last Updated: Jan 19, 2019, 05.14 PM IST|Original: Jan 19, 2019, 05.14 PM IST
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FMCG, Energy and IT packs are seen getting stronger on their momentum when compared against the broader markets.
The previous week saw the markets remaining range bound and oscillated in a 250-point range while ending with a modest gain. Though the markets did not take any directional call on either side, it saw significant amount of volatility within the defined range.

While holding on to the 50-week MA level which is 10,749 at close, the Nifty ended the week with gains of 112 points (+1.04%) on a weekly basis.

Despite staying range bound, there are a couple of technically important points that should be taken note of. On the daily charts, the Nifty rebounded more than once from the important support zone of 200-DMA and 100-DMA, which are important pattern support for the markets. On the weekly charts, the index has managed to crawl further above its 50-week MA, which is 10,749.

Nifty snip 6

In the coming week, we expect the markets to make a decisive directional call. For this to happen, the move beyond 10,950-mark will be important. All throughout the coming week, the level of 10,950 will be important to watch. Any decisive move beyond that will see the Nifty testing the lower trend line of the upward rising channel that it breached on the downside in the first week of October 2018.

We expect the levels of 10,950 and 11,300 acting as immediate resistance levels while supports are expected to come in at 10,810 and 10,670.

The weekly RSI is 53.0944. It has marked a fresh 14-period high, which is bullish. RSI does not show any divergence against the price, but it is seen breaking out of a minor formation.

Nifty snip 7

Nifty snip 8

Nifty snip 9

The weekly MACD remains bullish while trading above its signal line and remains in continuing buy mode. A small white body emerged on candles. It has emerged near the support area of 20-week MA and 50-week MA. Apart from this, it remains insignificant in the present context.

The zone of 10,900-10,950 might provide some resistance for some more time, but any meaningful breach of those levels on the upside will not only give a breakout from the ascending triangle formation on the daily charts, but also provide the impetus and strength needed to the index to make significant advancements on the weekly charts.

However, on technical grounds, unless the zone of 10,900-10,950 is meaningfully taken out, we suggest adopting highly stock and sector-specific approach. Exposures should be kept moderate unless a breakout is achieved. Shorts, however, should be avoided as
underlying intent of the markets remains buoyant.

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.

The study of Relative Rotation Graph (RRG) shows that the infrastructure index and Nifty Mid 50 index have continued to lose momentum despite remaining in the leading quadrant. The BankNifty Index, along with Services Sector and Financial Services index remains in the leading quadrant, is seen stable.

The PSUBank Index remains in leading quadrant, but is seen taking a breather and has shown mild signs of slowing down along with the Auto index which is in the improving quadrant. FMCG, Energy and IT packs are seen getting stronger on their momentum when compared against the broader markets.

CNX Metal, Pharma and PSE indices are seen continuing to lose ground and apart from stock-specific performances that will be seen, no major index level advancement is likely.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of

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