WEEKLY MARKET OUTLOOK FOR DECEMBER 12 THRU DECEMBER 16, 2016

WEEKLY MARKET OUTLOOK FOR DECEMBER 12 THRU DECEMBER 16, 2016

In our previous Weekly note, we had expected the NIFTY to remain stable with positive bias as no major external factor was likely to weigh heavy on the Markets. Keeping in line with this analysis, the Equity Markets had a stable week as the NIFTY not only moved past its 200-DMA on Daily Charts, took support on the 100-WMA on Weekly Charts and moved past 50-WMA on Weekly Charts as well while successfully marking the recent bottoms. It ended the Week with net Weekly gains of 174.95 points or 2.16% Coming week, we expect the NIFTY to continue to trade with a positive bias and it is expected to continue with its uptick on week-on-week basis. We have two macroeconomic data to deal with in this coming week. Markets are expected to react to Inflation numbers (YOY) coming in on Monday, December 12^th and to WPI Inflation numbers coming out on December 14^th.  So, given some intermittent bouts NIFTY is overall likely to maintain positive bias. The biggest external news flow that we will need to digest is the Federal Reserve’s decision on Interest Rate hike in the US which comes up in the middle of the coming week.

For the coming week, the NIFTY is likely to find immediate resistance at 8350 and 8425 and supports are likely to come in at 8195 and 8115 levels.

The RSI—Relative Strength Index on the Weekly Charts is 46.6728 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Weekly MACD is still bearish as it trades below its signal line. On Candles, a White Body has occurred and with the NIFTY closing at its high point of the weekly bar, it is generally expected that upticks will continue on the Charts.

On the Friday’s session, the NIFTY has once again gone on to add over 2.85 lakh shares in Open Interest. This indicates that we have seen increasing numbers of longs being added to the session since last couple of days.

If we look at Pattern Analysis, the NIFTY had formed a potential bottom at the intraday lows of 7916 as it marked a long lower shadow and a hammer on the Candles in the Week prior to this one. In the following Week, the NIFTY had a flat Week but in this week, it has continued with its up move while forming a White candle with the close very near to its Weekly High. This shows that a potential short term bottom has been confirmed and the NIFTY is more likely to continue with its uptick in the Week to come.

Overall, apart from two macroeconomic data coming out this week, the Federal Reserve Interest Rate decision will weigh heavy on the Markets. The NIFTY is likely to see some volatility remaining heavily ingrained in the sessions and the resistance levels that it has moved past are likely to lend supports in times of volatility. With larger picture favoring the upward bias, we would advice to refrain from any major directional exposure and completely refrain from creating shorts as all dips are likely to get utilized for making fresh purchases. While maintaining more liquidity, cautiously positive outlook is advised for the coming week.

A study of Relative Rotation Graphs – RRG suggest IT stocks will continue to outperform with INFY taking the lead followed by TCS. The Energy and Metal stocks along with PSU Banks are also likely to lead though they will react to some external news flows. AUTO has bucked the trend as they outperformed contrary to our expectations. Improvement in these stocks is likely to continue to moves will remain ranged. PHARMA and INFRA stocks are likely to see modest improvement on week-on-week basis. We are likely to see some weakening in MID50, CNXMID, MNC, FINANCIALS and FMCG Stocks.

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

Association of Technical Market Analysts, (ATMA), INDIA

www.EquityResearch.asia

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