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 12th and to WPI
Inflation numbers coming out on December 14th. 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
http://milan-vaishnav.blogspot.com
+91-98250-16331
