WEEKLY MARKET OUTLOOK FOR DECEMBER 05 THRU DECEMBER 09,
2016
While we refer our previous Weekly Note, we had mentioned
that though we remain positive bias towards a pullback, consolidation at
present levels cannot be ruled out. Keeping precisely in line with this
analysis, the NIFTY consolidated on week-on-week basis and ended the week
nearly flat with a modest loss of 27.50 points or 0.34%. The analysis remains
on similar note also for the following week. We feel that the NIFTY is likely
to continue to consolidate with a upward bias even if it witnesses intermittent
selling bouts. The current bottom that it has recently formed is all likely to
stay protected. The NIFTY is likely to react to RBI Monetary policy on December
7th and apart from this, the US Bond Yields are expected to remain
steady and no major sharp rise is expected.
For the coming week, the levels of 8175 and 8250 will remain
important resistance levels to watch for. The supports are expected at 8050 and
7960 levels.
The RSI—Relative Strength Index on the Weekly Chart is
40.1345 and it remains neutral as it shows no bullish or bearish divergence or
any failure swings. The Weekly MACD continues to remain bearish while it trades
below the signal line. On the Candles, a long upper shadow has occurred.
This will have no significance with the present structure of the Chart as it
has not occurred after any uptrend.
Coming to pattern analysis, the NIFTY formed a Double Top
formation near 8866levels at Close and has declined since that time. Today, it
stands corrected by nearly 882-odd points and stands nearly 38.2% corrected on
Close levels from its recent up move from 7029 to 8866 levels. Further to this,
it is still trading a not below (outside) the lower Bollinger Band and it would
be important for the Markets to stay inside the band to avoid any short moves on
the downside. On week-on-week basis, the
OI has increased with the daily declines that the NIFTY has witnessed
indicating some existence of fresh short positions in the Markets.
Overall, though we do not see any run-away rally in the
Markets, there will be couple of things that the NIFTY will need to take care
of to avoid any further weakness from creeping in. It will need to crawl back
above the 200-DMA on Daily Charts, and also move past 8195 levels which is the
100-WMA and important pattern resistance apart from 200-DMA at Close. Apart
from the monetary policy that Markets will react to, we do not see any external
factors negatively affecting the markets. Also, given the F&O data read
along with the lead indicators, the downsides may remain limited on weekly
basis. We continue to advice creating any major directional positions. While
maintaining more cash and liquidity, purchases in limited quantities may be
made in select stocks.
A study of Relative Rotation Graphs – RRG suggest just like
previous two Weeks, we will continue to see relative out-performance from IT
Stocks. Apart from this, considerable improvement in PHARMA stocks, PSUBANKS
and Metals will be seen. Some out-performance from select MidCaps and Energy
Stocks can also be expected. AUTO stocks are likely to remain laggards.
Weakness can be expected in FMCG and some portion of NIFTYMID50 Index.
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
http://milan-vaishnav.blogspot.com
+91-98250-16331
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