Nifty and sectoral trend for Monday
The first week of Samvat 2077 has been a fantastic one for the Nifty as Nifty touched all-time high of 12,963 and barring Thursday’s session, Nifty ended green for the rest of the trading sessions. For the week, Nifty added 0.62 per cent. For the last week, Nifty traded in a range of about 233 points and formed a ‘Hanging Man’ like candlestick pattern. It’s not a perfect textbook hanging man pattern, but it resembles to this pattern. Formation of hanging man like pattern after an up move points towards reversal on the cards, however, a confirmation for this will be required.
The last week range’s was restricted to just 233 points as compared to 461 and 723 points seen in the weeks preceding to the last week. This clearly indicates that momentum is waning at the lifetime high and this is what we had warned about in our last weekly note as we had mentioned momentum may stall in the frontline index and the real action would be seen in the broader indices. In-line with our expectation as the Nifty Midcap and Smallcap rallied 2.79 and 1.53 per cent, respectively in the last week and outperformed the frontline gauges.
The Nifty Midcap has managed to close above the January 2020 high and with this it has witnessed a breakout of the horizontal trendline. Also, on the weekly time frame the price is walking on the upper Bollinger Band and this indicates it’s in a strong uptrend. Meanwhile, the Nifty Smallcap index is still far away from its January 2020 highs, does it mean now it’s time for the baton to be passed on to the Smallcap and we could see Smallcap flourishing in the coming week?
The Nifty Smallcap index has witnessed a breakout of flat base like pattern and on the weekly chart the RSI has seen a Supper Bullish Range Shift as the level of 60 was not breached. On the daily time frame the Bollinger Bands have started to open up and the price has started to walk on the upper Bollinger Band. The ADX on the weekly chart is at 24.54 and as a rule of thumb ADX value above would mean that the index is entering into a strong trend.
Apart from the Nifty Midcap index, the Nifty FMCG demands attention. The Nifty FMCG index registered gains of meager 0.38 per cent in the last week, but on Friday this sector had jumped more than 1 per cent and barring one stock all other stock of this sector witnessed buying interest. Also, on the weekly chart the RSI is hovering around 59-60 mark and a move above 60 would be positive. While, on the daily chart the index seen range shift to super bullish as the in current decline in the index did not result into breach of 60-mark on the daily time frame. If we dig deeper, the ratio of Nifty FMCG Index to Nifty Midcap 100 has reached towards a potential support level. So stocks which are showing strong performance in this sector should be kept on radar for trading in the coming week.
Coming back to the Nifty, even though Nifty has formed a hanging man like pattern, as per the Heikin-Ashi candlestick on the weekly chart is not does not show any reversal sign. The level of 12,700-12,740 is a crucial support level and as long as Nifty holds above this level dips are likely to attract buyers. A breach of this support level could dent the sentiment and we could see a move towards 12,400-12,500 levels. On the upside, the level of 13,000-13,220 is likely to act as a resistance level.
Overall, it’s important to keep a watch on 12,700-12,740 levels on Nifty and for trading opportunities Nifty Midcap, Smallcap and Nifty FMCG are likely to provide ample opportunities for trading to the traders.