Dalal Street Week Ahead: Sideways consolidation likely to persist amid global trade uncertainty

The Nifty traded in a largely range-bound manner through the week, oscillating within a well-defined band and ending the week on a negative note. After a strong opening, the index saw selling pressure at higher levels, remaining under check within a narrow range of 25246–24806 spanning 440 points before settling slightly lower. Meanwhile, the India VIX declined modestly by 1.03% on a weekly basis, closing at 11.27.

For the week, Nifty ended with a minor loss of 131.40 points, or (-0.53%.) The index continues to face strong overhead resistance as it struggles near the upper edge of a rising channel formation. Despite recently reclaiming ground above the 20-week moving average, Nifty is showing signs of fatigue as it approaches the upper Bollinger band.

A decisive move beyond either of these levels may trigger a directional move. Heading into the coming week, markets may see a cautious or flat opening unless there is a strong global trigger. Uncertainty persists around the US trade deal, with the August 1 deadline approaching quickly.

On the upside, resistance is likely to be found at the 25150 and 25400 levels, while supports are expected at 24600 and 24450.

The weekly RSI stands at 54.98 and remains neutral, showing no divergence against price. The weekly MACD remains in a buy mode, trading above the signal line, indicating residual bullish momentum. No significant candlestick reversal pattern is observed on the weekly chart.From a pattern perspective, Nifty continues to oscillate within a rising channel that began in March 2023. While it briefly breached the lower edge in late April, it has since reclaimed that trendline and is now testing the upper bounds. The price remains above its 20-, 50-, and 100-week moving averages, reinforcing the intermediate uptrend.However, until a breakout above the channel occurs, the index is likely to witness rotational or sideways movement with the mentioned levels acting as support.Given the current structure and lack of a decisive breakout, traders should stay selective and avoid aggressive positioning. The prudent approach would be to protect existing gains and avoid chasing prices near resistance. A stock-specific strategy with tight stop losses would work better in the current scenario. The broader approach for the coming week should be one of cautious participation, staying mindful of key levels and awaiting a confirmed directional resolution.

In our look at Relative Rotation Graphs®, we compared various sectors against the CNX500 (NIFTY 500 Index), representing over 95% of the free-float market cap of all the listed stocks.

Relative Rotation Graphs (RRG) show that the Nifty Realty, Media, Metal, Midcap 100, and PSU Bank Indices are inside the leading quadrant. This group is likely to continue to outperform the broader markets relatively.

The Financial Services, Energy, Bank Nifty Index is inside the weakening quadrant. The FMCG, Consumption, Healthcare, and Pharma Indices are inside the lagging quadrant. However, except FMCG, the rest are showing improvement in their relative momentum.

The IT Index is seeing a slowdown in its relative momentum while staying inside the Improving quadrant. The Auto Index is located inside this quadrant, along with the Consumer Durable Index, which has just moved into the improving quadrant.

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

Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be reached at [email protected]