In our weekly note last week, we had discussed about the likelihood of the Nifty attempting to move past its falling trend line resistance, which joins the lower tops.
In the week gone by, the benchmark index struggled throughout to move past this pattern area resistance but could not make any clear headway on the upside. The pullback seen on the last trading session of the week helped the Nifty index close the week with a gain of 50.05 points, or 0.46 per cent.
However, though this may restrict and resist the immediate upward move in the present context, but the RSI is seen trying to break out of a pattern formation. The weekly MACD is bullish as it trades above the signal line. No significant formations were observed on the candles.
Next week is going to be critical for the markets as Nifty moving past the pattern resistance of the trend line joining a probable lower tops will be very important. We expect the market to remain rangebound. F&O data suggests the range might get a little broader, but downsides will certainly remain capped.
The coming week is likely to see the market turn highly stock and sector specific. One should continue to guard profits at higher levels. Shorts should be avoided, unless some critical supports are breached, as the undercurrent continues to be buoyant.
A study of Relative Rotation Graphs shows PSU banks have further improved in terms of their relative momentum and are expected to continue this trajectory in the coming weeks as well. Along with this, the Bank NIFTY pack has moved into the leading quadrant and is expected to outperform on a relative basis. It is likely to have the company of the financial services sector, which is also expected to outperform.
The FMCG pack is likely to do well but performance may remain stock specific. Apart from this, the pharma pack is expected to put up a better show on the relative momentum front. Broader indices such as CNX 100, CNX 200 and CNX 500 will continue on the falling trajectory and this may check any runaway rise in the broader market. Auto, midcaps, smallcaps and Nifty Next 50 continue to deteriorate on the momentum front. No show is expected from the media pack. IT and realty may see sporadic outperformance.
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