Throughout the week gone by, the Indian equity market remained less volatile than expected, but at the same time, it marked some important technical events. After trading in a 350-point range, the index faced resistance at the key resistance zone, retraced and ended the week with a modest loss. RBI’s credit policy largely remained a non-event for the market. The headline Nifty50 ended with a net loss of 52.15 points (-0.44 per cent) on a weekly note.
The previous week also witnessed a few important technical events. Nifty marked a fresh incremental high, but failed to confirm this attempted breakout. The market has reinforced the 12,000-12,040 zone as an intermediate top and a key resistance area. India Volatility Index VIX has declined some 7.53 per cent to 14.86.
Also, the index faced resistance at the pattern resistance created by the lower trend line of the 30-month-long upward rising channel that Nifty broke on the downside in October 2018. This trend line is rising and, therefore, in spite of Nifty marking incremental highs, it faced resistance at this trend line for the third week in a row.
As we head into a new week, we need to take a serious note that the market is likely to face broader technical headwinds. The current technical structure on the charts does not show any possibility of a fresh, sustainable runaway rise. There may be some intermittent technical pullbacks, but a major lasting and sustainable upward move is unlikely.
The coming week is likely to see Nifty face stiff resistance at 12,000 and 12,080 levels. Supports should come in at 11,750 and 11,600.
The weekly RSI stood at 63.78. It remained neutral and showed no divergence against price.
However, on visual inspection, the RSI showed formation of lower tops, which may act in a bearish way going forward. The weekly MACD continued to remain bullish and traded above the signal line. No significant formations were observed on the candles.
Pattern analysis shows Nifty continued to face resistance at the lower trend line of the upward rising channel for the third week in a row. The index has failed to confirm an attempted breakout, and the 12,000-12,040 zone remains a key resistance area for the market.
We are likely to see some intermittent pullbacks in the coming week. However, such pullbacks may remain temporary, and the market may continue to see selling pressure at higher levels. With the breakout not getting confirmed, we may expect bearish bias to prevail in the market. A technical pullback, if any, should be utilised to protect profit at higher levels. While choosing not to chase the technical pullbacks, if any, one should maintain a highly cautious view for the coming week.
In our look at Relative Rotation Graphs, we compared various sectors against CNX500, which represents over 95 per cent of the free float market-cap of all the listed stocks.
A review of Relative Rotation Graphs (RRG) shows the market is likely to see strong relative outperformance from the services, financial services, and the IT packs in the coming week.
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