WEEKLY MARKET OUTLOOK FOR MAY 29 THRU JUN 02, 2017
In our previous weekly note, we had expected this week to
remain dominated with rollover centric activities. There were accumulated
shorts in the Markets and it had a stronger-than-expected effect on the
Markets. The benchmark NIFTY50 which was net negative for the week, turned the
tables down, and ended this week with net gains of 167.20 points or 1.77% on
weekly basis. Though the Markets remain strong, the coming week will some
momentum tapering off and taking some breather. The art would lie in picking
stock specific action to extract gains as Markets may take some breather
without losing any significant ground.
The Markets are in uncharted territory once again and the
levels of 9620 and 9735 may pose potential resistance. Supports come in lower
at 9605 and 9530 zones.
The Relative Strength Index – RSI on the Weekly Chart is
75.8654. Though it trades in overbought zone, it has marked a fresh 14-period
high and it is bullish. The Weekly MACD trades above its signal line and it is
bullish as well.
The Pattern analysis shows the Inverted Head & Shoulder
pattern that developed on the Weekly Charts remain perfectly in place. The
Markets have successfully broken out of that pattern and has continued it’s up move
without showing any significant retracement.
Overall, the Markets are overbought on Weekly Charts.
However, being overbought is no reason to sell and on the contrary, it exhibits
underlying strength in the Markets. We may see Markets remaining range bound
for some time moving sideways in a defined trajectory with minor declines but
in any sense, it is all likely to keep its primary trend intact.
A study of Relative Rotation Graphs – RRG show that REALTY
stock will continue to outperform but may slow down so far as momentum is
concerned. We will continue to see outperformance from NIFTYJR, PSUBANKS.
Select INFRA Stock will be seen getting stronger. PHARMA has suddenly lost
momentum and it is not likely to make any meaningful gateway this week. AUTO will
continue to outperform. METAL stocks too seem to be preparing for some long
term up move. IT is likely to take some breather after the recent pullback but
that too, just like METALS is consolidating its space. No outperformance is
expected from MEDIA and ENERGY stock.
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
