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Nifty50: Deep Dive + Sectoral indices covered: FMCG, Media, Infra

23rd Dec , 2022 Weekly Market Outlook

Welcome to EXP Invest, I am Kavita and I make Stock market related content. I post daily market outlook on my free stock market telegram channel In this Weekly Market Outlook , we will discuss , the entire week's activity and ponder on what might be coming next week , purely from a technical analysis perspective. If you are interested in stock specific analysis, watch my Let's get technical series

Let's start with a look at Nifty's charts

This three minute chart of nifty shows last five days of price action. Here are the observations   Every time RSI came to the level of 30 a small RSI positive divergence indicated the subsequent rally  Every time that is a positive divergence indicated a rally the rally kept becoming weaker and weaker  In the second rally RSI clearly failed to move above the level of 60 which is the RSI resistance level in a bearish market  Today again RSI has shown RSI positive divergence and after the sharp decline it wouldn't be surprising if there is some bounce back. The short term resistance for that probably rally  is the 200 day moving average at the level of 17,968
NIFTY50- 3MIN CHART

This three minute chart of nifty shows last five days of price action. Here are the observations

Every time RSI came to the level of 30 a small RSI positive divergence indicated the subsequent rally Every time that is a positive divergence indicated a rally the rally kept becoming weaker and weaker In the second rally RSI clearly failed to move above the level of 60 which is the RSI resistance level in a bearish market Today again RSI has shown RSI positive divergence and after the sharp decline it wouldn't be surprising if there is some bounce back. The short term resistance for that probably rally is the 200 day moving average at the level of 17,968

Moving on to the 15 minute chart of Nifty, we are covering a little over three weeks of price action.


On 16 December RSI on 15 minute breached the level of 30 which was an indication of heavy weakness coming . Our identified support level of 18,200 was broken this week and Nifty has approached the level the next stated level of 17,800 already.   The RSI is also close to the level of 30 and there is positive divergence between the previous price low and current price level versus previous low on RSI versus current level on RSI which is above 30. In the last weekly market outlook we mentioned that RSI on 15 minute chart of nifty had touched the level of 30 and was expected to rally , Instead of rallying what RSI did was to create a broadening triangle which is a bearish continuation pattern , And by yesterday it has completed the same amount of decline as was seen at the start of this correction
NIFTY 15MIN CHART

On 16 December RSI on 15 minute breached the level of 30 which was an indication of heavy weakness coming . Our identified support level of 18,200 was broken this week and Nifty has approached the level the next stated level of 17,800 already. The RSI is also close to the level of 30 and there is positive divergence between the previous price low and current price level versus previous low on RSI versus current level on RSI which is above 30.

In the previous weekly market outlook we mentioned that RSI on 15 minute chart of nifty had touched the level of 30 and was expected to rally , Instead of rallying what RSI did was to create a BROADENING TRIANGLE which is a bearish continuation pattern , and by yesterday it has completed the same amount of decline as was seen from the start of this correction to the start of the pattern. The pattern is completed.

Let's move a time frame higher to 75 minute chart.

Evidently, the support trendline has been breached. But we are here to look for the next best support level in the event of continued weakness. There are two levels which we should look out for 1st 17,400 second and the more important level is 16,750 because there is a gap at this level formed on 28th of July 2022 which was the breakaway gap in a series of breakaway gaps indicating a strong rally was about to come which is remained unknown felt that being said if we do happen to see the level of 16,700 on nifty it will be a beacon of further continued weakness and the level of 15,900 would become a distinct possibility.
NIFTY 75M CHART

Evidently, the support trendline has been breached. But we are here to look for the next best support level in the event of continued weakness. There are two levels which we should look out for 1st 17,400 second and the more important level is 16,750 because there is a gap at this level formed on 28th of July 2022 which was the breakaway gap in a series of breakaway gaps indicating a strong rally was about to come which is remained unknown felt that being said if we do happen to see the level of 16,700 on nifty it will be a beacon of further continued weakness and the level of 15,900 would become a distinct possibility.

The best strategy for market conditions when deeper and deeper levels stare us in the face is to stay true to market strategy follow your stop losses and maintain your discipline don't let fear of losses or greed of a reversal sway you away from your discipline .


RELATIVE SECTOR PERFORMANCE

Let's take a look at the relative sectoral performance of the week


This chart shows the performance of all sectors since the start of this week and clearly last week's losers were this week's winners- Nifty healthcare and the CNX Pharma sector have closed with gains of two to 3% Last week's winner are also this week's losers as the PSU bank closed a steep 10% lower, Along with every other sector closing between 2 to 10% lower this week .
RELATIVE SECTORAL INDEX CHART

This chart shows the performance of all sectors since the start of this week and clearly last week's losers were this week's winners- Nifty healthcare and the CNX Pharma sector have closed with gains of two to 3% Last week's winner are also this week's losers as the PSU bank closed a steep 10% lower, Along with every other sector closing between 2 to 10% lower this week . Let's take a look at some select sectors which have interesting observations for us to discuss

SECTORAL ANALYSIS

FMCG -

Since the market has turned quite bearish I want to discuss the FMCG sector as a lot of people have the notion that in bearish market FMCG stocks are the best to play with.


FMCG DAILY CHART

On this daily chart of FMCG index I can see there is a double negative divergence which is not a good news . The last part of the rally which started from the second week of July is a typical extended rally as it has happened on a negative divergence which indicates that the momentum of the index has not been as good in the last leg relative to its own historical price action.


Switching to the 15 minute chart . I have drawn this trend line to join the extended part of the rally.  The price is near the support There is a small positive divergence which has been formed today. Hard to expect more than 3 to 4% upside from here . Avoid any new positions , for existing positions consider unloading if there is a bounce back.  So far the index has fallen 4% but I expect this decline to continue . A 6% further downside seems inevitable but it can also go as low as 12% lower than the current level .
FMCG 15 MIN CHART

Switching to the 15 minute chart . I have drawn this trend line to join the extended part of the rally. The price is near the support There is a small positive divergence which has been formed today. Hard to expect more than 3 to 4% upside from here . Avoid any new positions , for existing positions consider unloading if there is a bounce back. So far the index has fallen 4% but I expect this decline to continue . A 6% further downside seems inevitable but it can also go as low as 12% lower than the current level .

INFRA-


On the daily chart of infra index the tendency of plateauing at higher levels before absolutely plummeting by 20 to 40% is very evident. it has already happened on 5 instances.
INFRA INDEX CHART SHOWING PLATEAUING AND PLUMMETING

On the daily chart of infra index the tendency of plateauing at higher levels before absolutely plummeting by 20 to 40% is very evident. it has already happened on 5 instances.



Zooming in on more recent price action, a fake breakout can be seen. Upon zooming in to the 15 minute chart we also see the recent support trendline has been breached on the index and there is a massive negative divergence.  Considering the global scenario of fiscal tightening through increasing interest rates and the rally which has been witnessed in the infra stocks since the month of June , the sector as a whole is best avoided for the foreseeable future .
INFRA INDEX 15 MIN CHART

Zooming in on more recent price action, a fake breakout can be seen. Upon zooming in to the 15 minute chart we also see the recent support trendline has been breached on the index and there is a massive negative divergence. Considering the global scenario of fiscal tightening through increasing interest rates and the rally which has been witnessed in the infra stocks since the month of June , the sector as a whole is best avoided for the foreseeable future .

MEDIA-

This is the daily chart. The media sector is showing only signs of positivity the RSI is in the lower segment of the positive range it has been oscillating since 30 April 2020 .
media index chart- rsi range shift

This is the daily chart. The media sector is showing only signs of positivity the RSI is in the lower segment of the positive range it has been oscillating since 30 April 2020 .

Let's analyze the upward trending channel and see the behavior of the stock on intraday chart every time it touched the support trendline of the channel


On the 15 minute chart a positive divergence is noted near the low the price touched the support trendline back on 4th August 2020
On the 15 minute chart a positive divergence is noted near the low the price touched the support trendline back on 4th August 2020

Second time on in mid april 2021 another positive divergence was seen
Second time on in mid april 2021 another positive divergence was seen

Third instance June 2022 another positive divergence was seen
Third instance June 2022 another positive divergence was seen
Switching to 75 minute chart on first instance the index rallied Nearly 30% on the second instance it rallied nearly 35% on the third instance it rallied nearly 25%
Switching to 75 minute chart on first instance the index rallied Nearly 30% on the second instance it rallied nearly 35% on the third instance it rallied nearly 25%

I believe with strict controls media sector can give some sweet momentum trading opportunities within the next two months , so we have another sector to join the pharma sectors positive commentary which were shared in the previous weekly market outlook Just knowing about the broad market and sectors analysis is not enough! To succeed in momentum trading you also need to know stocks , entry level, stoploss and target to participate in the right way! Through Exp invest I share stock ideas with my members in a subscription model. There are monthly and annual subscriptions , visit my website EXP-INVEST.IN/SUBSCRIPTION for more information. you can also buy individual stock ideas from the telegram channel ! This is all in this week's market outlook . Don’t forget to like and leave your comment below! I'll see you again next week !


-KAVITA AGRAWAL CMT CFA

SEBI registered Research Analyst

INH000010982

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