WEEKLY MARKET OUTLOOK FOR JAN 29 THRU FEB 02, 2018

WEEKLY MARKET OUTLOOK FOR JAN 29 THRU FEB 02, 2018

The Indian Equities saw the week ending on a strong note as the benchmark Index NIFTY50 ended stronger while closing the week with net gains of 174.95 points or 1.61%. The Markets ended positive if seen on a Weekly basis even if the Index consolidated in the second half of the week. While we head into another week beginning Monday, we are placed in a little tricky situation. While buoyancy is quite evident and the NIFTY has attempted to break out of the 24-month long upward rising channel, the lead indicators remain overbought and point towards likely consolidation and some corrective moves in the immediate short term. On the other hand, we go into the next week preparing to face one of the most important domestic events – The Union Budget – slated to be presented on Thursday. All these combined, are likely to infuse great volatility into the coming week.

The Weekly high of 11110 might act as immediate resistance for the Markets along with 11235 levels on the upper side. Supports come in much lower at 10980 and 10910 zones.

The Relative Strength Index – RSI on the Weekly Chart is 75.6039 and it has marked a fresh 14-period high which is bullish. RSI does not show any divergence against the price. The Weekly MACD is bullish as it trades above its signal line. Apart from the White Bodied Candle which shows continuation of the uptrend, not other significant formations were observed.

The pattern analysis presents an interesting picture. The NIFTY has attempted to break out of the 24-month long upward rising channel. However, while attempting this, it has turned overbought. If this condition is read along with other evidence present on the Chart, it might be a while before it continues with the breakout.

While the NIFTY has attempted a break out from a 24-month long rising channel, the other indicators do not paint a pretty picture for the immediate short term. The lead indicators are overbought. Though this denotes strength, it may lead to some short term corrective moves as well. The F&O data shows NIFTY PCR (Put-Call-Ratio) too in much overbought levels. The Volatility Index – VIX on the Weekly Charts is inching higher towards the levels seen only in 2016. Along with the deteriorated Market breadth, it will not be a surprise if the NIFTY goes in some volatile corrective moves. It is recommended to not to opt for a mad momentum chase but remain extremely selective while picking stocks and keep exposures to moderate levels.

A study of Relative Rotation Graphs – RRG show along with PSU Banks, and broader Indices like NIFTY Next 50, and Midcaps, CNX 200, CNX500 all have collective showed slowing down and evident loss of momentum. This is likely to continue in the coming week as well. Some sectors like FMCG, IT, Services, etc. may buck the trend and continue to show relative improvement in their performance as compared to the Markets in general. Auto and Pharma may see some select pocket of out-performance. Apart from this, overall loss of momentum across the Markets may be expected on weekly basis.

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, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

Milan Vaishnav, CMT, MSTA
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)

Member: 
CMT Association (Formerly known as Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts (STA), UK 
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