The Nifty is currently seen in a sideways consolidation, navigating in a narrow band of 400-points. It continues to trade above key moving averages, but the absence of follow-through buying near the upper edge of the range suggests temporary exhaustion. Importantly, the 25,700–25,850 zone has emerged as crucial near-term support, not only because it marks the lower end of the current consolidation but also because it is aligned with the 50-DMA. The trend is still broadly positive, but a sustained move above 26,100 is now needed to reignite the upward momentum. A breakdown below 25,700 could trigger mild profit-taking and extend the lower range.
ETMarkets.comGiven the lack of decisive moves in either direction, markets may see a muted start to the truncated week, especially with the Christmas holiday on Thursday, leading to lower participation. On the upside, resistance is expected at 26,100 and then at 26,250. Support comes at 25,850 and 25,700, both structurally important in the current context.
The weekly RSI remains at 59.92 and remains neutral with no divergence against price, indicating ongoing range-bound behavior. The MACD remains above the signal line on the weekly chart, although the histogram is flattening, indicating a loss of momentum. No significant candlestick formation was observed during the week, highlighting the indecisiveness.
From a pattern analysis perspective, the Nifty is seen consolidating above the trendline above a broad symmetrical triangle that it broke out earlier. While the breakout is still in place, the index is testing its breakout zone. Rising short- and medium-term moving averages continue to respect, offering deep structural support with the 50-week MA at 24,518 and the 100-week MA at 24,067. Bollinger Bands are starting to narrow, which is a precursor to a range widening move in the coming weeks.
Given the current context, participants are advised to adopt a stock-specific approach with a cautious stance on aggressive index bets till the range of 25,700-26,100 is settled. Profit protection should be preferred, especially in the absence of any major triggers and low volatility environment. Unless a directional breakout occurs, the approach for the coming week will be to remain selective, maintain tight stop losses and avoid gaining momentum near resistance levels.
In our look at Relative Rotation Graphs®, we compared various sectors against the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-float market cap of all listed stocks.
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Relative Rotation Graphs (RRG) shows that Nifty Bank Index, Infrastructure, PSU Bank, Financial Services and Midcap 100 Index are within the leading quartile. Some of them are apparently seen slowing down their relative speed. However, collectively, these groups can outperform the broader markets relatively.
ETMarkets.comThe Nifty Auto Index is in the weakening quadrant but its relative momentum has seen a slight improvement. The metal index is also in the weakening quadrant.
The commodity index has moved into the lagging quadrant. Media, PSE, consumer, FMCG and energy indices are also within the lagging quartile and may underperform the broader markets. Energy, however, is seen to modestly improve its relative momentum.
IT and Nifty services sectors are inside the improving quadrant and moving positively. The realty sector is also in this quadrant, but is seen giving up its relative momentum against the broader markets.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and Founder of EquityResearch.asia and ChartWizard.ae is based in Vadodara. He can be contacted at milan.vaishnav@equityresearch.asia
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