WEEKLY MARKET OUTLOOK FOR FEB 05 THRU FEB 09, 2018

WEEKLY MARKET OUTLOOK FOR FEB 05 THRU FEB 09, 2018

Equity Markets saw a pathetic ending to the Week as the Markets reacted negatively and in a volatile manner to the Union Budget. The benchmark NIFTY50 ended the week with a net weekly loss of 309.05 points or 2.79%. If we have a deeper look, the pain was much more in the broader Markets. The Midcap Indices fell 4% to 6% while the NIFTY Small Cap Index lost as much as 10.63%. In the coming week, we do not expect a drastic pullback in prices but we certainly see that the Markets in general may attempt to find stability. While some pain may be visible in broader markets, the attempt to find stability may come from the front line large cap stocks.

The coming week will see stiff resistance coming in at 10900 and 11170. Supports come in much lower at 10600 and 10480 zones. The markets have 3% gap on either side to move in the coming week as the volatility has expanded its range.

The Relative Strength Index – RSI on the Weekly Chart is 63.3798 and it has just moved below 70 from a topping formation. The Weekly MACD still remains bullish as it continues to trade above its signal line. A big black candle has emerged with an engulfing bearish line. This has given credibility to the resistance area of 11100-11170 area and has temporarily marked this area as its top.

Pattern analysis paints a relatively simpler picture. The NIFTY attempted to break out of the 24-month long upward rising channel. But the previous week’s Close has sent NIFTY back into this rising channel. Even at current levels, it trades well above its short term 20-Period Moving Average.

All in all, the coming Week certainly does not print a pretty picture. It does not show possibilities of any sharp technical pullback. However, it does show likelihood that the Markets may attempt to find stability. Heavily leveraged positions from the broader markets will continue to find its way out. We strongly recommend traders not to attempt to find bottoms but maintain adequate liquidity to protect their positions. Markets may still take some time before it fully digests the Budget. Smart portfolio investors were seen initiating and rotating their positions and it is likely to continue in the coming week as well.

 A study of Relative Rotation Graphs – RRG shows that baring sectors like IT and FMCG, there is evident sharp loss of momentum across all sectors in the Markets. IT and FMCG are likely to be stand alone relative out-performers in the coming week. Along with this, we will see METALS which has been weakening for quite some time, may see some attempt to consolidate and improve its relative performance against the general Markets. Therefore, apart from IT, FMCG and some pockets of METAL pack, no major outperformance is expected from any quarter of the Market.

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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