shrewd: Dalal Street Week Ahead: Wise to book profit at current levels unless the Nifty breaks above 18,400; movements very specific to the actions observed

The markets have navigated the past week completely on the lines analyzed. We have seen a classic consolidation. The Nifty took no directional movement throughout the week. Intermittent profit taking has been observed. In contrast, these phases have seen markets recover from lows.

The Nifty Bank Index continued to outperform the Nifty relatively; this phenomenon should also continue during the coming week. Given the consolidation, the trading range in the markets remained lower. The index hovered in a range of 232.35 points during the week. The global index finally closed with a slight loss of 42.05 points (-0.23%).

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The Nifty Bank Index remains one of the strongest indexes; while Nifty remains within striking distance of its lifespan peak, Banknifty has already staged a breakout. As long as this index remains above 41,900 levels, this breakout will remain valid and in effect. We are also entering the expiration week of the current month spin-off series; this will keep the markets influenced by activities centered on refinancing.

Derived data shows that Nifty has stiff resistance between 18,300 and 18,400 levels. Markets will remain in consolidation as long as they trade below this zone. A further resumption of the upward move will only occur after Nifty moves above the 18400 levels. Volatility remained unchanged; India Vix was down just 0.10% to 14.39.

The week ahead should see a stable start to the day. The 18,410 and 18,600 levels will act as potential resistance levels; supports are seen at 18200 and 18060. The trading range over the next few days should remain capped if the Nifty stays below the 18400 levels.

The weekly RSI is 63.49; it remains neutral and shows no divergence from the price. The weekly MACD is bullish and is trading above the signal line. A spinning top emerged over the candles; this shows the indecisive behavior of market players.

Analysis of the weekly chart patterns shows that the Nifty is showing fatigue as it nears the high point of the 18600 level lifespan. There is a minor resistance area between 18,300 and 18,400 levels; Unless we exit this zone with volumes, we will see the markets continue to consolidate within a defined range.

From a technical standpoint, there are greater possibilities that even if Bank Nifty consolidates at current levels or extends its move, Nifty is likely to catch up given its recent underperformance against the benchmark. banking index. However, for that, the Nifty would need to break above 18300-18400. In other words, the area of ​​the 18300-18400 levels has become an inflection point for the Nifty.

Until these levels are completely eliminated, we could see the markets remaining in consolidation. The next few days should also remain stock specific; it is strongly recommended that unless the Nifty does not break above 18400, it would be wise to protect profits at current levels. New purchases should be limited to stocks that enjoy high relative strength. A cautiously positive outlook is advised for the week ahead.

In our review of relative rotation charts, we compared various sectors to the CNX500 (NIFTY 500 Index), which accounts for over 95% of the free float market capitalization of all listed stocks.

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Relative Rotation (RRG) chart analysis shows Nifty PSU Bank and Metal indices are firmly inside the leader

. Nifty Bank also resides in the main quadrant. These three groups are likely to relatively outperform the broader markets. The Nifty services sector index also rolled inside the main quadrant.

The shrewd financial services sector is in the weakening quadrant; however, looking at the trajectory of the tail, we see it rotating towards the front quadrant. Additionally, the Energy, Auto, Midcap 100, FMCG, and Consumption ratings are also in the weakening quadrant.

The Nifty Realty and Energy indices are languishing in the lagging quadrant. We see that the Nifty Media Sector Index is slowing its momentum while being in the improving quadrant. This will likely lead to relative underperformance of this sector against broader markets. The Nifty Pharma, PSE, IT, Commodities and Infrastructure indices are firmly placed in the improving quadrant.

Important note: RRG charts show the relative strength and momentum of a group of stocks. The chart above shows relative performance against the Nifty500 Index (Broad Markets) and should not be used directly as a buy or sell signal.

Milan Vaishnav, CMT, MSTA, is a consulting technical analyst and founder of EquityResearch.asia and ChartWizard.ae. He can be contacted at milan.vaishnav@equityresearch.asia