Nifty This Week: Technical Charts And More – Plenty Of Data From Three Days
A data graph tracks the movement of stocks on the stock exchange in Germany. (Photographer: Alex Kraus/Bloomberg)

Nifty This Week: Technical Charts And More – Plenty Of Data From Three Days


A very short trading week provides us with very little data variance to analyse with. The first comment on the truncated week was that the three days acquitted themselves rather well, with two of them posting gains and an inside day providing an intra-week buying opportunity.

At the moment, we think nothing much happened as of now but when we look back at this week, say six months from today, no one will remember that it was a three-day week. So we must look at the weekly charts from such an angle, just as another data point or a plot on the chart and not as a three-day blip. When seen that way, the week ended provides us with some interesting data.

First is that all the sectoral indices and the main indices finished positive for the week. That’s no mean feat, considering that they had got smashed nice and proper across the board, not just in the earlier week, but in several cases for a few weeks consistently. For a study let’s take a look at a bunch of sector indices together to understand where the market is looking these days.

Nifty This Week: Technical Charts And More – Plenty Of Data From Three Days

The top three charts (Private Bank, PSU Bank, Pharma) are clearly recovering from a correction of multi weeks. The lower three (IT, Metals, FMCG) are placed much better, with Metals staging the best move higher among them all. FMCG is not too bad either pushing up into a verge of a breakout.

Now, I have chosen these six because they pretty much constitute where most of the trading action occurs on a daily basis. Everyone loves the metal stocks but IT and FMCG are patronised more by larger players rather than retail. So if these two are showing some upside traction then one can possibly conclude that larger players are also at work perhaps. In contrast look at the rather anaemic move by the Private Bank index. This is one of the most heavily traded pockets and the conviction there seems to be lacking quite a bit! PSU banks in fact appear to have fared better, with more decisive price action. Interesting layout in Pharma index, it shows a gapped-up move and a top close coming after about a 10-week decline (probably one of the largest reaction time).

This is the way I would look at these charts: the more time taken in reaction, the longer people took to arrive at a buy decision.

If there is price damage during the fall (certainly can be seen in Pharma) more the long exits that have occurred. The lesser the price damage and more consolidation (FMCG), the more reluctant holders have been letting go of their longs and are probably waiting for the time correction part to run out.

Metals had all uncertain candles with lower shadows with very limited price damage indicating the highest willingness to buy into intra-week dips. See the charts again from this perspective offered.

Now it would be easy to understand how to interpret these sectoral moves as they happen in the coming week. Clearly, we must have our eyes trained on the metal names. “Oh, they have gone up too much,” you say? Just look at the chart once again, look at the succession of four doji-type candles all with lower shadows! Even for a novice chart reader, that is a sitting duck!

Now, with an upside resolution of the uncertainty of four weeks, there ought to be more gains. Does that mean we shall not see any decline? Of course not! What it means, however, is that intra-week dips are to be bought. Following that simple rule would be sufficient to try and grab some of the expected advances of metal stocks in the coming week. A similar fate, perhaps, awaits the FMCG lot. The breakout is imminent but it would be better to wait for that actual event to occur. Maybe it will happen early or late in the week, we know not that. But once it does manifest, don’t hang around saying “if only I had bought it earlier”. In the market, it is all about the now. The minute an event has gone past you, it’s gone forever. Analysis is done so that we can be ready for the “now” moment as it arrives!

Oh, in all this focus on sector indices, did we forget to talk about the Nifty and Bank Nifty? Let’s get back to our Index six-pack!

Nifty This Week: Technical Charts And More – Plenty Of Data From Three Days

Well, it’s evident that the Bank Nifty and Financial Services index have been under some consistent pressure which seems to have escaped the Nifty. But look at the bunch on the lower row, the Small, Mid, and NSE 500. Despite a horrible February month, we can see that they certainly are none the worse for that mauling that traders took!

What can that mean, you think? I reckon that retail investors (who reside in the small/midcap area) are not so badly affected as traders in futures (large caps) have been last month. So they ought to be a lot more active in the market in the week ahead in contrast to the large-cap (read FnO) traders. So perhaps that is the area (i.e. momentum investing) that may bring in the moolah in the next week?

The Q4 results dates have been announced for various names. Still about a week to go, for sure. But rumour mills become active, right, around this time? So those who know some stuff may start becoming active already. Keep a watch.

The Nifty can get back into its stride only after crossing 15,000-15,100 levels. As I write this, the SGX Nifty is already flirting with 15k levels. No idea whether this show of strength will last until we reopen on Monday. But that is what we should be watching to read the signs here. Bank Nifty will perhaps get dragged up in its wake as the indices pertaining to the banks are not too bullishly poised as yet.

Sometimes you think you may not get much data from a three-day curtailed week. But I think we found sufficient data for us to plan our week ahead. Now to sit back and watch whether it flows to plan and take trades accordingly!

CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise and NeoTrader; and chief investment officer of Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.

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