WEEKLY MARKET OUTLOOK FOR FEBRUARY 20 THRU FEBRUARY 23,
2017
The Week ending on Friday
remained quite eventful as the benchmark NIFTY50 saw good amount of volatile
swings during the Week but ended flat with nominal gains of 28.15 points or
0.32% on Weekly basis. We had mentioned in our two previous Weekly notes about
possibility of NIFTY testing the 8900-mark. This week, with the Weekly high of
8896.45, NIFTY just fell short of this level. In the coming Week, we see some
signs of exhaustion on the Weekly Charts. We might see some up ticks in the
coming trading days but some consolidation from higher levels cannot be ruled
out. The coming Week being expiry week and also a short one with Friday being a
trading holiday is likely to prevent the Markets from posting any runaway rise.
However, the undercurrent remains very much in tact and we certainly expect the
benchmark to test the 8900-8950 zones as it approaches its Double Top
resistance zone.
In the coming week, the
levels of 8900 and 8975 will pose stiff resistance to the Markets. The supports
come in quite lower at 8765 and 8680 levels.
The Relative Strength Index –
RSI on the Weekly Charts is 63.1843 and it has reached its highest value in
last 14-period which is Bullish. The Weekly MACD remains bullish while it
continues to trade above its signal line. On Candle, a Doji Star has
occurred. If we read this formation in the present context and the structure of
the Chart, though it may not signal a reversal but is likely to push the
Markets in some more consolidation. However, this will require confirmation on
the next bar.
The pattern analysis show the Markets clearly approaching it Double Top
formation and approaching its most recent highs formed in the last quarter of
the year 2016. If we take a broader look, NIFTY is in fact forming a TRIPLE TOP
formation. This formation is valid if we also take in to account the top formed
early 2015 which is slightly away. Further important indication of a buoyant undercurrent is that the third top is formed with a significantly higher bottom
by NIFTY. Therefore, while the NIFTY adjusts itself and deliberates a bit in
form of a range bound consolidation, overall trend remains intact from all
possible angles.
Overall, though we certainly
expect the coming week to be volatile, we do not see any significant corrective activity coming
place. The way the Charts show possible broad ranged consolidation, it also
indicates some more underlying steam left in the Markets. We advice to keep the
overall positions very light given the expiry week and the long week-end, we
reiterate to use the consolidation time in making select quality purchases.
However, given the present scenario, some evident sector rotation will hold the
key in successful stock selection. Cautious approach is advised for the coming
week.
A study of Relative Rotation Graphs – RRG clearly show that
the IT Stocks, though after putting up stunning and resilient performance over
previous week, will continue to lose momentum. Individual performance will
dominate but the momentum is likely to remain less as compared to Markets in
general. The REALTY pack will continue to improve its relative outperformance
and this is also likely to induce relative outperformance in housing finance
companies as well, though on very selective note. SMALL CAP universe will show
further gain in momentum. INFRA stocks will also lead the up move, if any and
will remain resilient to the corrective downsides, if any. We will see some
distinct outperformance from select FMCG Stocks as well. While METAL and ENERGY
pack will continue to weaken on week on week basis, we might see some
consolidation from the PSUBANK stocks. While PHARMA is likely to lag as a
sector, select performance from participants of MIDCAP and NIFTYJR pack cannot
be ruled out.
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
+91-98250-16331
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