WEEKLY MARKET OUTLOOK FOR FEBRUARY 06 THRU FEBRUARY 10,
2017
For the week ending Friday,
the benchmark NIFTY50 has ended the week with net gains of 99.70 points or
1.15%, with the Budget Day rally contributing to the positive ending of the
Week. The way we had mentioned in the previous Weekly Note, this week as well,
the NIFTY50 has continued to throw divergent signals on the Weekly and Daily
Chart. It stays “overbought” on the Daily Chart, whilel it stays poised for
further up move on Weekly Chart. What it has demonstrated in most unclear terms
is it underlying bouyancy which is refusing to go away fuelled by one of the
most level-headed Budget and supported by in-place macro fundamentals and
strong global equity set-up. The coming week will see a stable start and going
down the line we cannot rule out consoldiation and intermittant profit taking
bouts from higher levels but in most likelihood, we may see NIFTY advancing
towards 8850-8900 levels.
In the coming week, 8790 and
8900 will act as immediate resistance while the levels of 8675 and 8610 will
bring in supports.
The Relative Strength Index –
RSI on the Weekly Charts is 61.3354 and it has reached its highest value in
last 14-periods which is Bullish. It does not show any divergence against the
price. The Weekly MACD is Bullish as it trades above its signal line. No major
formations on Candles are observed but generally speaking white candles usually
imply continuation of the trend in the current direction unless a reversal bar
/ candle is formed.
Pattern analysis on the Weekly
Charts presents ever clearer picture. After retracing nearly 50% of its prior
up move, the NIFTY has successfully resumed its up move. The current bands are
in line with the NIFTY’s normal volatiliity and therefore further suggests the
clarity of the pattern. The Weekly Close of the NIFTY above the SMA shows
increased possibility of the Markets advancing towards the upper band which can
be its next logical targets. So, either in this Week or the next, the
possibilities of the NIFTY testing the 8850-8900 levels cannot be ruled out.
All and all, the overbought
nature of the Markets on the Daily Charts may cause it to oscillate in a given
range while it consolidates. But on week-on-week basis, the up trend remains
intact. Baring some range bound consolidation, we can expect the current trend
to continue. With the given bouyant nature of the Markets remaining intact, all
dips should be utilized to make selective quality purchases while also
protecting profits in existing positions. The dips can be squarely utilized to
make rotational select purchases in the sectors which relatively underperformed
and may outperformed in coming Week.
A study of Relative Rotation Graphs – RRG shows considerable
loss of momentum of the CNXIT following developments on the H1B Visa front in
the US. Though this reaction might be knee-jerk, the relative loss of momentum
will remain visible this week as well. Though the IT Stocks are now expected to
consolidate and seem to have digested these developments. Relative
outperformance will remain evident in
FMCG and REALTY stocks. INFRA stocks too are likely to relatively fare better.
PSUBANKS are likely to arrest the loss of momentum and look upwards. PHARMA are
likely to remain sluggish on Weekly basis and so will be the Metals who might
exhibit some slowdown.
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
