Although the market ended flat on a weekly basis, the past four sessions remained quite volatile. The markets stepped into the week while inheriting a poor global trade setup, wherein the weakness was inflicted by the bearish reactions of the US market to Jerome Powell’s comments at the Jackson Hole symposium.

The Fed commented that it has all the intentions of continuing with a similar quantum of rate hikes until the macroeconomic figures return to the desired levels. This saw the global markets getting weaker. Indian markets also suffered a gap-down opening at the beginning of the week. However, all our gap-down openings were ultimately bought into and this kept the markets within the broad range and above their crucial supports.

After oscillating in a broad range of 611 points, the headline index closed flat with a negligible loss of 19 points (0.11%) on a weekly basis.

Nifty snip 3Agencies

Regardless of the reasons that we associate with the market reaction, Nifty has defined a clear range for itself from a technical perspective. First, Nifty has not been able to move above the falling trend line pattern resistance that begins from the lifetime high point of 18,600 and joins the subsequent lower tops. Secondly, Nifty has rebounded from the levels very close to the 50-week MA which is placed at 17,135. This defines a broad trading zone of 17,100-17,650 levels for Nifty.

The volatility index, India VIX spiked as it rose by 7.33% to 19.55 on a weekly basis.

The coming week is all set to be within a defined range, with the levels of 17,650 and 17,790 expected to act as potential resistance points. The supports come in at 17,380 and 17,200 levels.

The weekly RSI stands at 57.76. It remains neutral and does not show any divergence against the price. The weekly MACD is bullish and stays above the signal line. No major formations are seen on the candles.

The pattern analysis of the weekly chart shows that Nifty has continued to resist the falling trend line pattern resistance. This is a significant pattern resistance as it begins from the lifetime high point of 18,600 and joins the subsequent lower tops. On the lower side, Nifty has rebounded from the levels very near to the 50-week MA, placed at 17136. This defines the broad trading range for Nifty between 17,100-17,700 levels.

As per the current technical setup, any sustainable directional move will occur only if Nifty moves past 17,700 levels or slips below 17,100 on a closing basis. A directional bias would be established only if Nifty moves past 17,700 or slips below 17,100 levels. Unless that happens, we will see the market oscillating back and forth in a defined range.

It is also very much likely that the market stays highly stock-specific. The key to navigating such markets would be to find those stocks that have a stronger or at least an improving relative strength against the broader markets. A highly selective approach is advised for the coming week.

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Nifty snip 3aAgencies
Nifty snip 3bAgencies

The analysis of Relative Rotation Graphs (RRG) shows that the metal index has rolled inside the improving quadrant. This marks a potential end to the relative underperformance of this group. Nifty Realty, PSU Bank, Bank Nifty, MidCap 100, and Financial Services Indices are firmly placed inside the improving quadrant. The Consumption index is also inside the leading but it is seen giving up on its relative momentum against the broader markets.

While Nifty FMCG index has moved ahead in the weakening quadrant, Auto index has just rolled over inside the weakening quadrant.

Nifty Media, Pharma, and the IT indices continue to languish inside the lagging quadrant. The infrastructure, energy, commodities, and PSE indices are also inside the lagging quadrant, but they appear to be improving on their relative momentum against the broader Nifty500 index.

Nifty Services sector index remains inside the improving quadrant.

Important Note: RRGTM charts show the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.


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