Mkts set to see higher lows, higher highs

The equity market regained the momentum on the upside, as the benchmark index closed positive all trading sessions during the last week. The benchmark index witnessed a highest weekly closing of 16,705 points, up 1.6 percent last week.

The BSE Sensex is also up by 1.4 percent. Finally, the broader market indices, Midcap-100 and Smallcap-100 indices, retrieved the momentum and gained by 2.1 percent and 1.9 percent, respectively. Nifty Energy is the top gainer with 3.1 percent. Nifty Metal, Financial, and IT indices closed with two- three percent.

On the flip side, Nifty Auto declined by 1.1 percent and Media down by 0.7 per cent. Unabated selling by FIIs continued. In fact, they increased the selling pressure. In the current month, they sold Rs7,652.49 crore worth of equities. DII bought Rs8,078.24 crore worth of stocks. The overall market breadth has not improved even though the index is making a new high.

During the last week, the Nifty hit an all-time high twice. It also closed above last week high. Under any circumstances, this price action is very bullish. The weekly MACD histogram shows an improved momentum on the upside. Once again, last week's bearish Shooting Star failed to get the confirmation for its downside implications. The Nifty is moving higher base by base.

The uptrend in stage-2 generally will have four bases. Any bases above four are not trustworthy. On a weekly chart, there are four bases already in place.

Importantly, the four base, the recent two-month consolidation met its target. Even then, during the last week, it formed two bearish shooting stars, with a tiny positive closing. On a lower time frame chart, the price structure looks like an ascending triangle. This is a bullish price pattern.

The target of this pattern breakout is at 17,040, which is meeting an extension target of prior major swings. As the Nifty is moving with profit booking at every high, and the supports are moving higher. Now, the major support is placed at the previous week's low 16,376 points. The 20DMA support is at 16,379 points. Only below this, support market will turn weaker. Any upward move from now will be only an extension.

For the last four months, the volumes are not encouraging. Even the Nifty futures volume was declining for the past five months. Meanwhile, the PCR range also moved higher. In the past, a PCR 1.5 was bearish. In the current conditions, 1.4 to 1.6 has become very normal. The recent 1.8 PCR also not shown any bearish impact on the market. The current 1.5 PCR may not show any impact.

There is one more important factor in the current market; very few sectors are leading the market. Only IT, the key heavyweight sector, is in the leading position. FMCG is slightly better than another sectors. Pharma, banking, and auto, which are other major sectors, are lagging in the current market, which shows a lack of leadership in the market. Even the Metals also weakened. The Reliance is consolidating for one year and near the breakout level.

Next week, we expect further positive sentiment to continue, as it registered an ascending triangle breakout on a lower time frame. It is also moving in an upward channel. In any case, if it consolidates, As mentioned above, as long as the Nifty trades above 16,376 points, be with a positive bias.

For a very short-term weakness, it must close below 16,565 points, which is Friday low. Higher lows and higher highs are up trend signs. Unless this price structure reverses, do not be bearish. The upside target remains at 17,040 to 17,265.

(The author is a financial journalist and technical analyst. He can be reached at tbchary@gmail.com)