Gemstone Equity Research & Advisory Services

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WEEKLY MARKET OUTLOOK FOR DEC 02 THRU DEC 06, 2019

After healthy consolidation near the 12000-levels over the past couple of weeks, the
NIFTY has attempted to break above year-long secondary trend that it was in by ending
the week with gains. Throughout the week, the markets pushed hard to breach the
double top resistance on the shorter-term charts while it continued to consolidate
fiercely. The last trading day of the week saw some paring of gains ahead of expected
weak GDP data. But despite this, the headline index ended the week with net gains of
141.65 points (1.19%). The Indian VIX has further cooled off by 6.56% to 13.90.

The coming week is set to be crucial for the markets, and it would decide its trajectory
for the near-term. The NIFTY has not broken out of the double top resistance on the
short-term charts, which stand at 12103. However, the weekly charts, the NIFTY is seen
preparing ground for a breakout as the RSI has broken out after penetrating a falling
trend line joining its lower tops. In the process, the RSI has also resolved a bearish
divergence. On the other side, the markets will have to digest weak GDP numbers, which
were more or less discounted during the day.

The coming week also expected to see some volatility rising as the NIFTY attempts to
break above its crucial resistance levels and also digesting the weak GDP numbers in the
process. The levels of 12160 and 12385 will act as immediate resistance points while
supports will come in at 11900 and 11800 levels. The trading zone is expected to stay
wider than usual for the markets.

The Relative Strength Index (RSI) on the weekly chart is 64.21; it has marked a fresh 14-
period high, which is bullish. The RSI also appears to be resolving the continued bearish
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divergence in favor of potential upside as it has penetrated above the falling trend line
that joined its lower tops. The weekly MACD is bullish and trades above its signal line.

The pattern analysis of the weekly charts shows that the primary uptrend, which
continued for over three years got interrupted at the end of 2018. The NIFTY is
presently in a secondary trend for over a year. The index appears to be attempting to
break out of this trend. It would be important to see if the present pattern acts as a
continuation pattern over the coming weeks.

We might see some initial reactions to the weak GDP data, and this may see some
increase in the volatility over the coming days. However, this being said, there are
higher chances that the NIFTY attempts once again to move past the crucial 12103
levels and close above that.

All in all, the ancillary readings points towards likely up move over the coming days. But
as of now, NIFTY is yet to give a clean break out, and by the time this happens, it is
recommended to keep chasing the momentum carefully. Shorts should be avoided, and
until the attempt to breakout fails, all downside moves should be used to make modest
purchases. A cautiously positive approach is advised for the day.

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

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The review of Relative Rotation Graphs (RRG) shows NIFTY Private Banks, PSU Banks,
BankNifty, and Financial Services Index see strong rotation towards the leading
quadrant. The Energy Index also stays in the leading quadrant, and these groups
collectively are likely to relatively out-perform the markets over the short term. The
commodities space also shows some strong momentum and may see stock-specific
performance over the coming weeks.

On the other side, the FMCG and Consumption have topped out and are expected to lose
momentum going ahead as they have moved into the weakening quadrant. The IT
group, too, is expected to continue to underperform the broader markets. The
Infrastructure space also may underperform as it is witnessing the rotation towards the
lagging quadrant.

Important Note: RRG™ charts show you the relative strength and momentum for 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 Consultant Technical Analyst and founder of Gemstone
Equity Research & Advisory Services, Vadodara. He can be reached at
milan.vaishnav@equityresearch.asia)

Milan Vaishnav, CMT, MSTA Consulting Technical Analyst

Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
Tel: +91-70164 32277 | www.EquityResearch.asia | milan.vaishnav@equityresearch.asia
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