The week gone by was immensely volatile, with the market oscillating back and forth in a wide range, before settling on a relatively flat note.
The week saw benchmark indices seeing a gap-down on Monday, tracking geopolitical tensions between Russia and Ukraine. The market recouped entire losses the very next day, led by equally strong short coverings.
After gyrating 600 points for the first two days, the remaining three days of the week saw narrow moves. The headline index Nifty50 eventually ended the week with modest losses of 98.45 points or 0.57 per cent.
Coming week will see the expiry of February series futures and options contracts. The weekly options data suggests the upside is capped near 17,500 as that level holds highest Call open interest (OI). On the lower side, the Put OI stays maximum at the 17,000 strike.
This defines the likely range for the coming week, assuming external factors remaining the same. For now, the Russia-Ukraine tension is the only external factor that stays fluid. The low of 16,809 that the Nifty50 hit last week would be crucial to be watched, as this point also coincides with the extended trend line acting as a support of late.
Volatility surged in the last few sessions, with India VIX soaring 18.66 per cent to 22.17 on a weekly basis. The coming week is likely to begin on a tepid note and levels of 17,450 and 1,7550 will act as key resistance points. Supports for the 50-pack index come in at 17,100 and 16,850 levels.
The weekly RSI stood at 51.08, which is neutral and does not show any divergence against the price.
The weekly MACD stays bearish and below the signal line.
A white body was formed on the candle, which shows that the Nifty50 closed at higher level than it opened at. No clear formation was otherwise seen on charts.
There has been a lot of noise on daily charts but the pattern analysis of the weekly charts show the Nifty50 is consolidating sideways in a very wide, but defined range.
At present, the index trades above all its three key moving averages and it is just below the 20-week moving averages, which stands at 17,591 at present.
In coming days, the index may stay in a defined range. Some defensive approach may be observed with only a few pockets displaying resilience. It is recommended to avoid large leveraged positions. While keeping overall positions light, a cautious and vigilant approach is advised.
On Relative Rotation Graphs®, here is how various sectors staked up against CNX500 (NIFTY 500 Index) that represents over 95 per cent of the free float market cap of all the stocks listed.
The analysis of Relative Rotation Graphs (RRG) suggests that other than the Energy Index, which has taken the turn for the better while staying in the leading quadrant, other sector positions remained largely unchanged. The Nifty Auto, The Nifty Commodities, The Nifty PSE and the Nifty PSU Bank index are also inside the leading quadrant. The IT and the Realty indices, on the other hand, are inside the lagging quadrant accompanied by the Infrastructure and the Media index.
Nifty Financial Service, Nifty Consumption, and the Nifty FMCG indices are inside the lagging quadrant. However, they appear to be improving on their relative momentum.
Nifty Pharma, Nifty Metal and the Nifty Bank indices are inside the improving quadrant; on the weekly note, they are likely to continue showing resilient performance against the broader Nifty500 index.
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.
Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at [email protected]