WEEKLY MARKET OUTLOOK FOR JANUARY 02 THRU JANUARY 06, 2017
We had expected in our previous Weekly note that the Markets
may remain stable and attempt making of supports in 7900-7920 zones. Keeping in
line with this analysis, the NIFTY ended the last trading day of the year 2016
on a buoyant note and ended the Week with net gains of 200.05 points or 2.51%. In the coming week, we can fairly
expect the 7900-7920 zones at firm support for the Markets. We expect the NIFTY
to consolidate at higher levels. It may reach its logical levels of 8250-8275
levels and consolidate at those levels as they hold multiple pattern resistance
levels. With a positive bias, the Markets will consolidate. Some amount of
volatility will remain and minor intermittent profit taking bouts cannot be
ruled out.
For the coming week, the levels of 8200 and 8260 will hold
as immediate resistance levels. The supports come in at 8110 and 8060 levels.
The RSI—Relative Strength Index on the Weekly Chart is
46.1442 and it remains neutral as it shows no bullish or bearish divergence or
any failure swings. The Weekly MACD is bearish as it trades below its signal
line. However, it has potentially marked its lows and is moving towards
positive crossover in coming weeks. On the Candles, an Engulfing Bullish
Pattern has occurred. Importantly this pattern has occurred after a
downtrend and some consolidation and therefore it marks the present lows at as
potential bottom.
While having a look at pattern analysis, the NIFTY has
nearly 50% of its rally from 6900 to 8900-odd mark and this retracement of 50%
has held as its support for the immediate short term. The NIFTY had marked a
potential bottom around 7916 levels and while the NIFTY took support once again
near these levels, it has potentially confirmed this support. It would be
crucially important now for the NIFTY to maintain this support and confirm the
reversal by forming a higher tops and higher bottoms on the Charts.
All and all, the coming week is likely to remain positive
and though we cannot expect any runaway rise once again, the NIFTY will
continue to mark modest gains with positive bias. The sector rotation is very
much evident since last previous two weeks and select pockets will continue to
support the Markets and out-perform. Positive outlook is advised for the coming
week. The softening of yields and the Rupee is remaining relatively stable and
in capped range with aid this reading in the coming week.
A study of Relative Rotation Graphs – RRG suggest though
ENERGY and METAL stocks will continue to lead the Markets, we will see them
slowly losing momentum and some amount of profit taking can be expected. IT
stocks will continue to outperform and we will see continued and improved performance
from FMCG stocks as well. CNXSERVICE and INFRA stocks are also likely to do
well. MEDIA stocks are expected to lag and considerable loss of momentum can be
expected in PSUBANK, CNXMEDIA, CNXMID and NIFTYJR stocks. However, select stock
specific performance within these indices will be seen.
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
