Nifty’s strong uptrend indicates steady momentum as markets expect another breakout

Markets traded with positive undertones all week, recovering smartly from lower levels. After reacting positively to strong election results in Bihar and hopes of a possible US-India trade deal, Nifty posted steady gains throughout the week.The index fluctuated within a range between 25,449 and 26,010, marking a trading band of 561 points. India’s VIX fell 4.94% on the week to close at 11.94, indicating continued risk appetite. By the end of the week, Nifty posted a net gain of 417.75 points or 1.64%.

The current technical setup reflects a structurally strong market that is steadily rising with broader participation. Nifty is comfortably above the major moving averages and navigating the symmetrical channel where it broke out a few weeks ago. It tests the upper Bollinger band around 26.045, indicating that while momentum remains intact, some near-term consolidation cannot be ruled out. The index shows no signs of exhaustion yet and the broader upward trend remains evident. Een beweging voorbij het recente hoogtepunt van 26.010 zou het momentum kunnen versnellen, terwijl de steun nu hoger is gesleept naar de zone van 25.700-25.500. Considering last week’s strong finish, Nifty is likely to see a stable to positive start in the coming week. Resistance is expected around the 26,050 and 26,200 levels. On the downside, there is immediate support at 25,600, followed by a more important zone around 25,400.

The weekly RSI stands at 61.38, which is bullish and remains neutral against the price, with no divergence observed. The weekly MACD is above its signal line and rising, supporting the strength of momentum. No major bearish candlestick pattern has formed on the weekly chart; instead, the current candle is a solid bullish body near the upper Bollinger band, indicating strength.

From the pattern analysis point of view, Nifty remains in an established uptrend and remains above the breakout zone of the symmetrical triangle pattern that it had resolved earlier. The index is trading well above its 50-, 100-, and 200-week moving averages, which continue to rise and support the long-term bullish structure. The setup shows no immediate signs of reversal or weakness.

Given the current structure, market participants must remain positively biased but exercise selective aggression. Since the index is trading close to the upper channel boundaries, blindly chasing prices should be avoided. Fresh longs should ideally be considered on dips near defined support zones. It would be wise to continue to grow earnings and take a stock-specific approach, while remaining alert to global and domestic news triggers. A disciplined, rotating strategy focused on sector leaders and relative strength would be the ideal way to navigate the week ahead.

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) continue to display NIFTY Auto, Metal and PSU Bank indices in the leading quadrant. While the Metal and PSU Bank sectors are seeing strong rotation, the Auto group is seen giving up its relative momentum. However, it is likely that these groups will relatively outperform the broader Nifty 500 Index.

Although the Nifty Midcap 100 Index is the only sector index in the weakening quadrant, it has significantly improved its relative momentum, indicating broader market participation in the moves the markets are currently making. The Nifty Financial Services, Realty, Banknifty and the Infrastructure Indices are in the lagging quadrant. However, they are strongly improving their relative momentum versus the broader markets. The media, services, pharmaceutical, FMCG and commodity indices are languishing in the lagging quadrant and could underperform the broader markets relatively.

The Nifty Energy Index has entered the improving quadrant. This marks a potential beginning of the relative outperformance phase. The Nifty PSE Index is also running decently within the improving quadrant; the IT index, on the other hand, continues to reduce its relative momentum.

Important Note: RRG™ 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.

Milan Vaishnav, CMT, is a technical analyst with MSTA Consulting

(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These do not represent the views of the Economic Times)