WEEKLY MARKET OUTLOOK FOR MAY 14 THRU MAY 18, 2018

WEEKLY MARKET OUTLOOK FOR MAY 14 THRU MAY 18, 2018

In our previous Weekly note, we had pointed out emergence of 10785-mark  as not only a likely-lower-top but also an important resistance area for the Markets. The week that went by saw fierce consolidation happening in the Markets and the NIFTY resisted all week along to the 10785-mark. On the last day of the trading week, the NIFTY which had showed so much resilience all through the week, attempted to move past this resistance area. The benchmark NIFTY ended the week closing a notch above this level gaining 188.25 points or 1.77% on a weekly note.

As we enter into next week, the behavior of the Markets vis-à-vis the 10785 level would be extremely critical to watch for. If the NIFTY manages to move past this level in a convincing manner, we will see NIFTY moving towards its previous highs. Any slip below this will push the Markets again into some consolidation.

The coming week will see the levels of 10890 and 10975 acting as immediate resistance area. Supports come in at 10730 and 10610 zones. The range for the Markets is likely to remain little wider this week.

The Relative Strength Index – RSI on the Weekly Chart is 61.9829 and it has marked a fresh 14-period high. Also, RSI is seen breaking out of a pattern and is likely to lend strength to the Markets. Weekly MACD has reported a positive crossover and it is now bullish while trading above its signal line. No significant formations on Candles were noted this week.

The pattern analysis had raised the possibility of the level of 10785 acting as an important resistance mark for the Markets. It had also raised the possibility of it becoming a lower top. However, with the NIFTY attempting to move past this level, the coming week will remain extremely crucial to determine the short term trend of the Markets.

Overall, we are expected to see a modestly positive opening in the Markets if there are no overnight surprises in the global picture. Markets have political event of Karnataka election results to face which is likely to infuse some volatility in the Markets. Apart from this, if nothing untoward comes out of it, we will see NIFTY marking higher levels. We recommend remaining very selective and identify sectors which show strength once directional confirmation is established. Cautious but positive outlook is advised for coming week.

A study of Relative Rotation Graphs – shows though we did see some performance from IT Stocks in the week, it has continued to lose relative momentum on week-on-week basis. The broader indices like NIFTY Next 50 and NIFTY MID50, along with NIFTY INFRA has suddenly seen lows of relative momentum if seen on a weekly note. The coming week is likely to see relative out-performance from AUTO, FINANCIAL SERVICES, and select stocks of BANKNIFTY and PSU Banks which is showing mild improvement in its relative performance. Select ENERGY, MIDCAPS, and REALTY will see selective outperformance against the general Marktes.

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 known as Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts (STA), UK 
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