Dalal Street week ahead: Technical charts indicate bullish bias despite mild fatigue

The markets traded largely within a certain range last week and ended slightly negative. After testing a high of 26097.85, the Nifty failed to maintain its gains and had to cut back, ending the week slightly lower. The Index fluctuated within a narrow range of 386.65 points during the week. India’s VIX rose 4.85% to 12.15, indicating a slight increase in risk perception. While the Index lost 73.05 points (-0.28%) on a weekly basis, Nifty ended the month of October with a strong gain of 1111 points or 4.51%.

The current technical structure remains firmly bullish, but is showing signs of mild fatigue near the upper resistance zone. The Index has broken above the descending trendline pattern of the 2021 highs, confirming a bullish breakout. However, it faces resistance from above from the upper Bollinger band at 25949, and this zone could act as a supply zone in the near term. The markets are not yet trending aggressively, but the setup favors a bullish bias. Any sustained move above 26100 would push Nifty into another bullish trend, while a close below 25450 could further delay this breakout and lead to mild corrective moves.

Heading into a truncated week, with Wednesday being a holiday due to Gurupurab, markets may open on a tepid note. The Index is likely to encounter resistance at the 25950 and 26100 levels. Support is coming in at the 25600 and 25450 zones. Given the tight trading range over the past week and the lack of strong directional momentum, the Index could consolidate further before making a decisive move.

The weekly RSI stands at 60.57; it remains neutral and does not show any deviation compared to the price. The MACD remains in a buy mode as it remains above the signal line. No significant bearish or bullish candle formed on the weekly chart, and the structure reflects consolidation near highs rather than exhaustion. From a pattern analysis perspective, the Nifty has clearly left behind the long, symmetrical triangle consolidation of over twelve months. The Index has tested the breakout area and is now heading higher again. It is trading comfortably above all major moving averages – the 50-, 100- and 200-week MA – confirming a structurally sound setup. The breakout remains valid as long as the Index remains above the 25400-25450 range. Given the current context, market participants should remain selectively bullish and consider overhead resistance. Aggressive buying should be avoided until a clear price movement is identified. It would be wise to protect profits at higher levels and maintain a stock-specific approach. A cautiously optimistic stance with a preference for sectors showing relative strength would be an ideal strategy to navigate the crisis

next shortened week.

In our look at Relative Rotation Graphs®, we compared several sectors to the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-float market capitalization of all listed stocks.

Relative Rotation Graphs (RRG) continue to show the presence of three sectors, Nifty Auto, Metal and PSU Bank, within the leading quadrant. While the Auto is giving up and slowing down in relative terms, the PSU Bank and the Metal Index are rotating sharply. These groups will continue to outperform the broader Nifty 500 Index relatively.

The Nifty Midcap 100 Index remains within the weakening quadrant. It may deliver stock-specific shows but may lag in terms of overall relative performance.

The Nifty Pharma Index has entered the lagging quadrant. Convenient commodities, consumption and media languish badly in the lagging quadrant. The Realty, Bank Nifty, Infrastructure and Financial Services indices are also in this quadrant but are improving significantly in terms of relative momentum.

The energy, services and PSE indices have moved into the improving quadrant, signaling the start of a phase of relative outperformance. The IT and FMCG indices are also in this quadrant; their relative momentum is seen to slow down.

Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. In the chart above, they show relative performance against the NIFTY500 Index (broader markets) and should not be used directly as buy or sell signals.