Monday, January 23, 2017

WEEKLY MARKET OUTLOOK FOR JANUARY 23 THRU JANUARY 27, 2017

WEEKLY MARKET OUTLOOK FOR JANUARY 23 THRU JANUARY 27, 2017
The ending of the benchmark NIFTY into negative on Friday’s session summed up the entire week on a relatively flat note. The NIFTY50 ended the week with a net loss of 51 points or 0.61%. It was the Friday’s session that took the entire week into negative territory. The coming week is crucial as we enter the expiry of the current derivative series. Also, the previous Week has seen the NIFTY moving beyond the 8250-8275 zones and this week has seen the NIFTY sustaining above these levels. The opening of the coming week is expected to be modestly negative but relatively stable. Markets will see some stability returning and the levels of 8270-8300 zones will act as crucial support in coming days.

The coming week will find resistance  at 8420 and 8465 levels. The supports will exist at 8310 and 8270 levels. Any slip in the NIFTY levels below this will see some tempory weakness creeping in.

The Relative Strength Index – RSI on the Weekly Charts is 51.1492 and it does not show any failure swings. It does not show any bullish or bearish divergence either and therefore it remains neutral. The Weekly MACD is currently bearish and it is trading below its signal line. However, it is important to note that any consoldiation in the NIFTY or some up move will see this lead indicator reporting a positive crossover. No signficant formation is observed on Candles. An upper shadow is formed but it is not long enough to create any major potentially bearish situation.

Pattern analysis presents a simpler picture. NIFTY has seen a very distinct Double Top formation around 8968 levels on the Weekly Charts. After forming this evident formation, the NIFTY retraced but it has attempted to form a higher bottom by halting the retracement and attempting to move up from 7900-7920 zones. Post pullback of 500-odd points at Close levels, we are seeing the Markets consoldating in a broad 150-odd points range. It would be critically important for the Markets to sustain th e 8270-8300 zones as supports. Any dip below this will bring in some more temporary weakness in the immediate short term. The Bollinger Bands on the Weekly Charts are just 6.5% wider than normal. This reading singularly do not suggest any conclusive about the future movement but the wider-than-normal bands on the Daily Charts are likely to keep this week under consoldiation. Fresh sustainable up move shall occur only above 8460 levels.

All and all, other factor which is likely to play the spoil sport is are the rising US Bond yields. Volatility will remain  ingrained as we enter into expiry. The coming week is short as Thursday, January 26th remains a Republic Day holiday and the expiry happening a day earlier. There is no structural breach on the Charts and we therefore advise refraining from creating any major short positions. Sector churning is likely as few of the sectors are seen improving while some are distinctly losing momentum. While remaining moderate on the overall exposure, we advise cautious optimism in the coming Week.


A study of Relative Rotation Graphs – RRG suggest bulk of the damage on IT stocks is done and they might exhibit strength and eventually attempt to outperform. This is with a caveat of possible headwinds of negative news flows from US, if any, which with see some knee jerk reactions. Otherwise, we may see distinct relative outperformance from CNXIT. The FMCG and CNXIFRA stocks are likely to see continued performance. CNXSERVICE may relatively outperform but may also take a breather. We will see REALTY stocks consolidating on week-on-week basis and attempting to improve. The broader markets will see some possible slowdown in momentum and this will be reflected in METALS and CNXMID100, CNXMID50 and NIFTYJR stocks. The PHARMA may remain selectively weaker and we can expect CNXAUTO stocks consolidating their performance and attempt to relatively outperform.

 Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

Milan Vaishnav, CMT
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)
Member
Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA

+91-98250-16331 


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