Dalal Street Week Ahead: Uptrend intact on weekly charts, selective profit taking likely ahead

The markets have been trading with a positive bias over the past week as Nifty continued to move higher and consolidate within a certain range. The index fluctuated in a 462-point range during the week, marking a low of 25,878 and a high of 26,340 before settling at a lifetime high of 26,328.55, ending with a weekly gain of 286.25 points or 1.10%.Meanwhile, volatility rose slightly; The India VIX rose 3.28% on the week to close at 9.45, still at historically subdued levels.

The current technical setup of Nifty remains solidly bullish, but the index seems to be facing some congestion just below the upper Bollinger band. It remains in a strong uptrend and is trading above all major moving averages. However, momentum has waned as the index trades at its highest level in its lifetime, signaling possible fatigue unless new triggers emerge. There is no immediate sign of weakness, but markets are experiencing short-term overextension, and there are mild signs of an improvement in market breadth.However, this width still needs to be expanded significantly to sustain a healthy upward movement. The week ahead could see a steady start; unless an external catalyst intervenes, the bias remains positive with a cautious undertone. The two most immediate resistance levels to watch are 26,500 and 26,720. Supports are expected near 26,000 and 25,800. A break above 26,500 could prompt Nifty to test the upper end of the Bollinger Band around 26,712, while any slip below 25,800 could lead to mild profit-taking.

The weekly RSI stands at 64.19; it remains neutral and does not show any deviation compared to the price. It has hit a 14-period high, which is bullish. RSI is in strong momentum territory without being overbought. The weekly MACD remains above its signal line and continues to show a bullish crossover, although the histogram reflects relatively flattened momentum. No classic candlestick reversal patterns were observed on the weekly chart.

From a pattern perspective, Nifty has decisively broken the falling trendline resistance that had capped the highs since late 2024. ​​It continues to respect the rising trendline support that emerged from the March 2023 lows. The index is trading comfortably above its 20, 50 and 100-week moving averages. There is currently no reversal or exhaustion pattern visible on the weekly chart, although the proximity to the upper Bollinger band suggests the possibility of some consolidation.

For the coming week, participants are advised to take a measured approach. While the broader trend remains positive, selective profit taking cannot be ruled out, especially with the index trading near the upper band. Traders should vigilantly protect their profits and avoid aggressive new buying at current levels. A stock-specific approach with a focus on sectors showing relative strength is recommended. Prudence and disciplined risk management remain critical as we enter the first full trading week of 2026. 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 charts (RRG) do not indicate a major shift in leadership from sectors. The PSU Bank, Infrastructure, Metal, IT, Nifty Bank and Financial Services Indices are in the leading quadrant. These groups will continue to outperform the broader markets relatively.

Both the Nifty Auto and Metal indices are in the Improvement quadrant. However, both are seeing sharp improvements in their relative momentum.

The nifty commodity, consumption, FMCG and real estate indices continue to languish in the lagging quadrant. These groups are likely to underperform the broader Nifty 500 Index relatively. The energy, media and PSE sector indices are also in the lagging quadrant; however, they are seen to improve their relative momentum.

The Nifty Pharma Index is in the improving quadrant.

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.