Gemstone Equity Research & Advisory Services

Saturday, May 12, 2018

WEEKLY MARKET OUTLOOK FOR MAY 14 THRU MAY 18, 2018

WEEKLY MARKET OUTLOOK FOR MAY 14 THRU MAY 18, 2018

In our previous Weekly note, we had pointed out emergence of 10785-mark as not only a likely-lower-top but also an important resistance area for the Markets. The week that went by saw fierce consolidation happening in the Markets and the NIFTY resisted all week along to the 10785-mark. On the last day of the trading week, the NIFTY which had showed so much resilience all through the week, attempted to move past this resistance area. The benchmark NIFTY ended the week closing a notch above this level gaining 188.25 points or 1.77% on a weekly note.

As we enter into next week, the behavior of the Markets vis-à-vis the 10785 level would be extremely critical to watch for. If the NIFTY manages to move past this level in a convincing manner, we will see NIFTY moving towards its previous highs. Any slip below this will push the Markets again into some consolidation.

The coming week will see the levels of 10890 and 10975 acting as immediate resistance area. Supports come in at 10730 and 10610 zones. The range for the Markets is likely to remain little wider this week.

The Relative Strength Index – RSI on the Weekly Chart is 61.9829 and it has marked a fresh 14-period high. Also, RSI is seen breaking out of a pattern and is likely to lend strength to the Markets. Weekly MACD has reported a positive crossover and it is now bullish while trading above its signal line. No significant formations on Candles were noted this week.

The pattern analysis had raised the possibility of the level of 10785 acting as an important resistance mark for the Markets. It had also raised the possibility of it becoming a lower top. However, with the NIFTY attempting to move past this level, the coming week will remain extremely crucial to determine the short term trend of the Markets.

Overall, we are expected to see a modestly positive opening in the Markets if there are no overnight surprises in the global picture. Markets have political event of Karnataka election results to face which is likely to infuse some volatility in the Markets. Apart from this, if nothing untoward comes out of it, we will see NIFTY marking higher levels. We recommend remaining very selective and identify sectors which show strength once directional confirmation is established. Cautious but positive outlook is advised for coming week.

A study of Relative Rotation Graphs – shows though we did see some performance from IT Stocks in the week, it has continued to lose relative momentum on week-on-week basis. The broader indices like NIFTY Next 50 and NIFTY MID50, along with NIFTY INFRA has suddenly seen lows of relative momentum if seen on a weekly note. The coming week is likely to see relative out-performance from AUTO, FINANCIAL SERVICES, and select stocks of BANKNIFTY and PSU Banks which is showing mild improvement in its relative performance. Select ENERGY, MIDCAPS, and REALTY will see selective outperformance against the general Marktes.

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

Milan Vaishnav, CMT, MSTA
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)

Member:
CMT Association (Formerly known as Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts (STA), UK
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

+91- 70164-32277 / +91-98250-16331
milan.vaishnav@equityresearch.asia
milanvaishnav@yahoo.com

Friday, May 11, 2018

MARKET OUTLOOK FOR FRIDAY,MAY 11, 2018

MARKET OUTLOOK FOR FRIDAY,MAY 11, 2018

As outlined in our previous note about the importance of the resistance level of 10785, the NIFTY resisted precisely to that level in Thursday’s trade marking the high of 10785.55. NIFTY saw paring 80-points from that level and settled the day with minor loss of 25.15 points or 0.23%. The underperformance was seen more in broader Markets which lose anywhere in the range of 0.40% to 1.89%.

As we approach end the week, the NIFTY is going to face stiff resistance to the 10785 mark and this level will be marked as immediate major resistance are for the Markets for the immediate short term. That being said, we would also like to reiterate that with the amount of consolidation that is being seen and the way NIFTY is resisting any major downsides, it is gathering strength for the long run.

The levels of 10750 and 10785 will act as immediate resistance area for the Markets. Supports come in at 10685 and 10650 zones.

The Relative Strength Index – RSI on the Daily Chart is 62.4278 and it stays neutral against the price showing no divergence. The Daily MACD still remains bullish while trading above its signal line. On the Candles, a black body occurred. Its emergence exactly near the resistance area marks the credibility of the resistance level of 10785.

The pattern analysis shows consolidation occurring in the 10650-10785 zones after a breakout from the rectangle formation. If the Markets suffer a complete throw back, the levels of 10500 should act as important support. However, given the resilience that NIFTY is showing to any downsides, we expected this consolidation in a limited range to continue.

We believe there is still some room left for such range bound consolidation to continue. It is also important to note that given the fact that NIFTY has remained resilient to any major downsides so far, this should be viewed as underlying strength. We expect such consolidation to continue. Any downsides, if any, shall remain limited and any such down moves should be utilized to make fresh purchases. However, focus is likely to remain on defensive sectors until Markets achieves a fresh breakout. We recommend making select purchases in defensives with each down move but still continue to keep overall positions at moderate levels. Cautious view is advised until the level of 10785 is breached on the upside.

STOCKS TO WATCH:

Short positions were seen being added in FEDERAL BANK, DISH TV, IDEA, BHEL, JAIN IRRIGATION, SAIL, PFC, PNB, TATA MOTORS, AMBUJA CEMENTS, TATA MOTORS, ASHOK LEYLAND, NTPC and NCC.