Dalal Street Week Ahead: Stay cautious; short-covering likely on account of F&O expiry A to Z Counsel

The week that glided by was fairly contradictory in nature. However, this assertion holds provided that we take a look at it from completely different views and timeframes.

The market actually remained extremely risky because it reacted to international markets’ response to the 75 bps price hike by the Fed on Wednesday. However, on the weekly time-frame charts, it is only one extra week of consolidation close to the higher edge of the buying and selling vary with the breakout getting simply delayed.

The market discovered itself oscillating in a 628-point vary. Despite this, the headline index Nifty ended with only a loss of 204 factors (-1.16%) on a weekly foundation.

From a technical perspective, the degrees of 50-Week MA are in focus once more. Nifty has delayed its breakout from the falling development line that begins from the lifetime excessive level of 18,600 and joins the following decrease tops. Nifty has closed beneath this development line sample resistance, and this makes the extent of 17,700 a major resistance level for the index.

However, the main focus is on the decrease edge. The 50-Week MA is at the moment positioned at 17125. This stage is predicted to play out as essential assist for the market on a closing foundation. It signifies that any main slip beneath this stage on a closing foundation will invite incremental weak spot for the market.

Agencies

While we appeared on the technical construction of the chart, we want to hold a couple of information factors in thoughts as effectively. FIIs have been shorting the market as per the derivatives information. Net shorts have been added within the final three classes. As of now, the market is sitting with massive quantities of shorts within the system. The coming week is likely to see the degrees of 17,500 and 17,650 appearing as resistance factors. The helps are available in at 17,100 and 16,920 ranges.

The weekly RSI is 53.71. It stays impartial and doesn’t present any divergence towards the worth. The weekly MACD stays bullish and above its sign line.

Regardless of the talks round us regarding worry of recession, the extent of the potential decline, and the type of panic the present decline might set off, we want to strategy the market with a sane thoughts.

It is strongly beneficial that one should not resort to blindly shorting the market given the extent of the shorts that exist within the system. On the opposite hand, so far as making purchases is worried, one will want to keep extremely selective on this strategy.

While following the fundamentals, it’s strongly instructed that the highly-leveraged positions should be averted and total exposures needs to be stored at modest ranges. A short-covering from the decrease ranges can’t be dominated out as we head into the month-to-month derivatives expiry week. A cautious view is suggested for the approaching week.

In our take a look at Relative Rotation Graphs®, we in contrast varied sectors towards CNX500 (Nifty 500 Index), which represents over 95% of the free float market cap of all of the shares listed.

The evaluation of Relative Rotation Graphs (RRG) continues to present Nifty Financial Services, Bank Nifty, and PSU Bank indices positioned within the main

whereas sustaining their relative momentum towards the broader market. These pockets are likely to comparatively outperform the market. Midcap 100 and Realty indices are additionally contained in the main quadrant. They too might outperform however they’re additionally seen loosening up a bit on their relative momentum.

Nifty Consumption, FMCG, and Auto indices proceed to advance additional contained in the weakening quadrant.

Along with Nifty Pharma, Energy, Media, Infrastructure, and PSE indices additionally proceed to keep contained in the lagging quadrant. However, they seem to be enhancing their relative momentum whereas staying inside this quadrant. This holds true for the IT Index as effectively.

The Nifty Metal index continues to keep agency contained in the enhancing quadrant.

Important Note: RRGTM charts present the relative power and momentum of a gaggle of shares. In the above Chart, they present relative efficiency towards the Nifty500 index (Broader market) and shouldn’t be used straight as a purchase or promote sign.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae.)