NSE Nifty 50 index has ended the week with marginal gains of half a per cent on week-on-week basis. We had mentioned above potential halting of the up move previous week following a formation of falling window. The combination of previous two candles over previous two weeks had potential to temporarily halt the up move. In the coming week, the markets are likely to oscillate in a broad range with the levels of 8,750 acting as key support levels. In the coming week, the levels of 8,890 and 8,940 will act as resistance levels whereas the supports are expected to come in at 8,820 and 8,750 levels. The RSI—Relative Strength Index on the weekly chart is 67.6611 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stays bullish trading above its signal line.
On the derivatives front, the NIFTY September futures have shed over 8.88 lakh shares or 2.76 per cent in Open Interest. Some offloading or unwinding of long positions was witnessed on Friday. Pattern analysis of the Weekly Charts clearly suggests some more consolidation in the markets on week-to-week basis. We may see some up moves coming in on daily note but on a overall week basis, there are high chances that the markets continue to consolidate and oscillate in a broad range. The level of 8,750 will be key support level to watch out for. This level is an important pattern support level with the support line drawn from February lows. Even if the stock markets test these levels, there will be no structural breach on the charts. As mentioned previous week, a runaway rise beyond the previous high is not expected this coming week.
A study of Relative Rotation Graphs – RRG suggest that the markets will somewhat much-improved performance from IT stocks. Though runaway rise in IT also may not be expected but improvement vis-à-vis other sector is likely. Over and above this, out-performance is expected from energy, midcaps and Nifty Junior and media stocks. Metals and banks are likely to lose momentum in coming weeks.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)