Dalal Street Week Ahead: Caution! Risk-off mood may take hold of Nifty; stick to defensives
The trading range expanded on anticipated lines as Nifty oscillated in a 499-point range over the past five sessions. Despite a decent pullback on the last trading day of the week, the headline index closed with a net loss of 129 points (-0.66%) on a weekly basis. From a technical perspective, the high point of 19,991 has now become an intermediate top for the markets.
In the process of retracement from higher levels, Nifty has also dragged its resistance down to 19,750 levels. This makes the zone of 19,750-19,900 a strong resistance area for the markets unless taken out comprehensively. The Options data also suggest a very high accumulation of Call OI between 19,800-20,000 levels and this makes the zone a formidable resistance for the index.
The VIX, which came off by 5.47% on the last trading day of the week continues to remain at dangerously low levels. Despite the retracement that we saw, India VIX has risen by just 4.32% on a weekly note. The coming week is expected to see the levels of 19,620 and 19,750 acting as strong resistance points.
The supports are likely to come in at 19,380 and 19,200 levels. The weekly RSI stands at 67.87 and remains neutral against the price but it has slipped below 70 after staying inside the overbought zone. The weekly MACD is bullish and stays above the signal line.
A candle with a long lower shadow has occurred on the technical charts although this needs confirmation on the next bar. This has the potential to keep the markets under consolidation while disrupting the current rally. The pattern analysis of the weekly charts shows that Nifty achieved a breakout as it surged past the previous high point of 18,887; the breakout saw the index surging almost 1,100 points.
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