WEEKLY MARKET OUTLOOK FOR AUG 14 THRU AUG 18, 2017
In our couple of previous Weekly notes, we had indicated
about highly overbought Markets and overstretched technical indicators pointing
towards imminent sharp corrective moves. The benchmark NIFTY50 remained
vulnerable to volatile and sharp profit taking bouts and it happened precisely
that. In this Week that has gone by. The NIFTY ended the Week losing 355.60
points or 3.53% on a weekly basis. The coming week is a truncated week with a
holiday in between and we need to watch the 9700-9770 zones very closely. Any
breach of this level will have us see temporary disruption in the primary
uptrend.
Coming week is likely to see the levels of 9770 and 9890
acting as potential resistance levels. Downsides may extend up to 9530 levels
which is the 100-DMA of the Markets which is a
major support to look at in
event of continued weakness.
The Relative Strength Index – RSI on the Weekly Chart is
60.7076 and it has just moved below the topping formation which is bearish.
Weekly RSI has marked a bearish divergence by making a 14-period low while
NIFTY has not. The Weekly MACD still remains bullish while trading above its
signal line. A big black candle has occurred which establishes the credibility
of the resistance area. It reinforces the zones of 10114-10135 as immediate top
for the Markets. Further, an Engulfing Bearish candle has occurred which
further Markets these levels as a top for coming weeks.
All and all, it is pretty much evident that the levels of
10114-10135 have been marked as an immediate top. If we look at the levels on
the Daily Chart, if the Markets fail to trade above 9770-mark, its drifting
towards 100-DMA cannot be ruled out. Even the Weekly Chart suggests that there
is a room for some more corrective downsides in coming weeks. There will be
technical pullbacks in between this as well. Though the primary uptrend remains
intact, it certainly remains disrupted if the NIFTY trades below 9700 mark. Preserving
cash while remaining extremely stock specific is what is advised for the coming
week.
A study of Relative Rotation Graphs – RRG PHARMA Index
faltered on both Relative Strength and Momentum but this week, may attempt to
find bottom and consolidate. Select pockets of pharma stocks may see some
bottom fishing. IT and METAL will continue to relatively outperform the NIFTY .
We will see select out performance on relative basis from Energy sector as
well. Apart from this, all broader indices, Midcaps, Small cap and other
sectoral indices are not expected to see any good performance over coming week.
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
