WEEKLY MARKET OUTLOOK FOR DECEMBER 26 THRU DECEMBER 30,
2016
Indian Equities remained weaker-than-expected throughout the
previous week as the NIFTY ended the Week on Friday with a net loss of 153.70
points or 1.89% while forming a lower top lower bottom on the Weekly Bar
Charts. Not only did the NIFTY grossly resisted the 8150-8200 zones but
remained unsuccessful in moving past the 200-DMA which now becomes a major
pattern resistance to watch out for. In the coming week, though we expect a
stable start to the Markets, we do not see the Markets giving a runaway rise.
It is likely to trade in a broad trading range with the levels of 7900-mark
acting as very important pattern support to watch out for. For the stability to
return to the Markets and for the Markets to once again attempt and reverse, it
would be crucially important for the Markets not to get weaker and consolidate
in the current zone and hold current supports.
For the coming week, the NIFTY is likely to face resistance
at 8090 and 8175 levels. The supports are expected to come in at 7905 and 7850
levels.
The RSI—Relative Strength Index on the Weekly Chart is
39.1058 and it has reached its lowest value in last 14-periods which is
bearish. It does not show any bullish or bearish divergence and currently rests
at a pattern support. The Weekly MACD continues to remain bearish as it trades
below its signal line but it is flattening out. Apart from a black candle
no other significant pattern is observed on Candles.
If we have a look at pattern analysis, it remains evident
that the NIFTY is in continuing retracement after forming a Double Top
formation at 8968 levels. Since this formation, it is in corrective mode and is
gradually retracing since then. Having said this, though it has formed its
immediate bottom around 7916 levels, it is now important that the NIFTY defends
this level. It currently trades very near to that and though this bottom was
formed, it was not confirmed as the NIFTY failed to sustain its pullback. It
would be crucially important for the NIFTY to defend the 7900-mark in order to
consolidate and resume its up move and avoid further weakness to creep in.
Overall, we have expiry of current derivative series this
week and we will see the NIFTY continuing to remain dominated with rollovers. Also,
no major weakening of Rupee is expected and Bond Yields are not expected to
rise significantly. Though holding of the current support is expected,
downsides, if any, are expected to be limited. Clear sector churning is visible
and this will cause the individual stocks to out-perform. We do not advise
creating any major exposures until directional bias is established however,
declines should be used to make modest purchases.
A study of Relative Rotation Graphs – RRG suggest that IT
stocks are expected to keep improving its performance. Over and above this,
ENERGY and METALS will relatively outperform and we will see FMCG stocks
attempting to remain resilient and consolidate its performance. Select out
performance will be seen from PHARMA and INFRA stocks. PSU Banks are likely to
slow its momentum in 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
Association of Technical Market Analysts, (ATMA), INDIA
http://milan-vaishnav.blogspot.com
+91-98250-16331
