Saturday, October 14, 2017

WEEKLY MARKET OUTLOOK FOR OCT 16 THRU OCT 20, 2017

WEEKLY MARKET OUTLOOK FOR OCT 16 THRU OCT 20, 2017
The Indian Equity Markets had yet another good week as the benchmark NIFTY50 ended the week with net gains of 187.75 points or 1.88%. The week that has gone by has remained extremely important in more than one ways. The NIFTY has attempted to achieve a fresh breakout as it touched yet another new lifetime high of 10191.90. The Coming Week is much shorter one with just three working days. Thursday, 19th October will just have one hour Muhurat Trading Session and the Friday, 20th October remains a trading holiday.

The coming will see some very important and critical actions taking place in the Markets. On one hand, the NIFTY has formed a fresh lifetime high, but on the other hand, there no clear breakout as such and the Index has ended the day after a very brief retracement. The opening of the Markets on Monday and its behavior vis-à-vis the 10200 levels will be very critical in coming days. The breakout, if any, and its sustainability will be of immense importance in coming week.

The levels of 10190 and 10320 may pose as immediate resistance area for the Markets in coming week. Supports come in at 10030 and 9910 zones.

The Relative Strength Index – RSI on the Weekly Chart is 65.5905. There is a evident Bearish Divergence on the Weekly Charts as the Weekly RSI has not formed a fresh high while the NIFTY did. The Weekly MACD still continues to remain bearish as it trades below its signal line. No significant formations were observed on Candles.

The pattern analysis suggest that while the NIFTY is trading comfortably in the 18-month long upward rising channel, it is also seen developing a rectangular trading range (just like it is seen on Daily Charts) on the Weekly Charts as well. It should be no surprise if the NIFTY continues to oscillate in this broad trading range rather than giving a fresh breakout.

All and all, any attempt for a breakout has to be dealt with in an extremely cautious manner. The NIFTY PCR (Put-to-Call ratio) remains well above 1.50 mark and the VIX is ruling at its recent lows. Any up move will remain vulnerable to sharp profit taking activities until it is very much comprehensive in nature. Highly cautious and stock specific approach is advised amidst highly buoyant setup.

A study of Relative Rotation Graphs – RRG show that though METAL stocks are likely to continue to relatively out-perform, they are slowly losing momentum. However, their performance is likely to continue. Among others, the IT, MEDIA and AUTO pack is likely to continue to consolidate its strength in coming week. In event of any continued up move, we might see broader participation from CNXMID and NIFTYMID50 stocks as well. PSUBANKS continued to lag but may consolidate its performance. No major relative outperformance is expected from CNXFIN, REALTY and FMCG stocks. ENERGY stocks are likely to slowdown and lose some momentum.

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia

Milan Vaishnav, CMT, MSTA
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)
Member
CMT Association (Formerly Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts, STA (UK)


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