January 21, 2021

market outlook: Dalal Avenue Week Forward: Nifty tech charts giving combined indicators; upside seems to be capped

After locking in strong positive aspects in July, Nifty has kicked off August on a constructive observe. Within the final 5 periods, Nifty traded in a 374-point vary earlier than closing the week with modest positive aspects. The index stayed above its essential ranges on each the each day and weekly timeframe charts. Regardless of remaining liable to revenue taking at larger ranges, the index didn’t make particular strikes on both aspect.

After oscillating in a wider vary than the one the place it moved within the earlier week, Nifty ended the week with internet positive aspects of 140.60 factors, or 1.27 per cent.

The market continues to pile on incremental positive aspects. Nonetheless, this time, it has made a decrease high and backside on the weekly charts. Nifty has managed to maintain its head above its key 50-week transferring common at 10,912 and 100-week transferring common at 11,018. Volatility additionally continued to say no, as INDIA VIX got here off 6.68% to 22.58. The 11,000-10,900 zone is essential for Nifty, because it represents vital help ranges.

On the upper aspect, the index faces resistance on the development line that it violated earlier when it got here down.

The market is more likely to see a tentative begin to the approaching week with the upside capped. The 11,290 and 11,350 ranges will act as sturdy resistance, whereas helps will are available at 11,000 and 10,910 ranges.


The weekly RSI stands at 59.84: it stays impartial and doesn’t present any divergence in opposition to worth. The weekly MACD stays bullish, because it trades above the sign line. A White Physique has occurred on the candles. Other than this, no different vital formation was seen.

When the index got here off its highs, it violated a channel shaped over the previous 12 months. At the moment, Nifty has twice confronted resistance just under the decrease development line of that channel, which was a help when Nifty was above that line, however that line is now anticipated to behave as a powerful resistance. This makes the 11,300-14,00 zone a powerful resistance for Nifty.

There is no such thing as a signal which can level in the direction of any severe correction available in the market. That stated, Nifty seems overstretched on the short-term charts and this will drive the market to enter consolidation. This implies although we could not anticipate any severe corrective transfer, any runaway up-move can be unlikely.

As long as Nifty stays under the 11,300-11,400 zone, up-moves, if any, will proceed to face resistance, making the market on the whole weak to revenue taking. We advocate approaching the market selectively and avoiding main exposures until there are some consolidation strikes, which is able to make the present vertical transfer more healthy. Over the previous couple of days, the market breadth has not remained as sturdy accurately, and this stays a priority for the close to time period.


In our have a look at Relative Rotation Graphs®, we in contrast numerous sectors in opposition to CNX500 (Nifty500 index), which represents over 95 per cent of the free-float market-cap of all of the listed stocks.

A overview of Relative Rotation Graphs (RRG) reveals one ought to keep away from some sectors regardless of their particular person good efficiency. Nifty Vitality Index is about to crawl contained in the weakening quadrant, whereas Nifty Commodities group has already entered that quadrant. The Infrastructure, PSE, FMCG and Consumption teams are rotating negatively within the weakening, lagging quadrants. These teams could provide some stock-specific efficiency, however are unlikely to place up an incredible present in a collective foundation.

The IT group has made a powerful rotating again transfer contained in the main quadrant. The Auto index continues to stay within the main quadrant. These two teams are more likely to comparatively outperform the broader market.


Other than this, Nifty Realty, Financial institution Nifty, PSU Banks Providers and Monetary Providers teams are positioned comfortably within the bettering quadrant and look like rotating in a north-easterly path, whereas sustaining their relative momentum. They’re set to supply a resilient present together with the IT and Auto packs.

Vital Observe: RRGTM charts present the relative power and momentum for a bunch of stocks. Within the above chart, they present relative efficiency in opposition to the Nifty500 Index (broader market) and shouldn’t be used straight as purchase or promote indicators.

(Milan Vaishnav, CMT, MSTA is a Marketing consultant Technical Analyst and founding father of Gemstone Fairness Analysis & Advisory Providers, Vadodara. He could be reached at [email protected])