Dalal Street Week Ahead: Weak technical setup to keep bulls under pressure

Nifty remained under sustained pressure through the week and ended in the red, extending the corrective phase for the fifth consecutive week. The index traded in a wide 658.60-point range with selling pressure intensifying after the 23,900–24,000 support zone was violated. Nifty eventually settled at 23,398.10, not far above the weekly low.

Volatility also rose, with India VIX up 15.07% for the week to 12.29, reflecting increased risk perception. Nifty ended the week with a loss of 499.60 points (-2.09%).
The technical structure has deteriorated following the violation of the important 23,900–24,000 support zone. This area had provided support during the recent consolidation but will now be expected to act as resistance on any pullback. More importantly, Nifty has slipped below its 100-week moving average, currently placed at 24,401, and remains below the 50-week MA at 24,673.

This keeps the broader setup defensive. Unless the index manages to reclaim 23,900–24,000 on a closing basis, meaningful and sustainable upmoves are unlikely; rallies towards this zone are more likely to encounter selling pressure.

The coming week will be truncated, with Monday, September 14 being a trading holiday on account of Ganesh Chaturthi; trading will therefore resume on Tuesday. A positive but cautious start is expected as Nifty adjust to the global trade setup that transpired on Monday. The 23,600 and 23,850 levels are expected to act as resistance areas. Supports are likely to come in at 23,230 and 23,000.

The weekly RSI stands at 39.93 and remains below the neutral 50 mark. It is not yet oversold and remains neutral against the price. The weekly MACD is bullish and above the signal line, but sits on the verge of a negative crossover as indicated by a narrowing Histogram. The latest weekly candle is distinctly bearish with a relatively large real body and a close in the lower part of the week’s range.
Pattern analysis shows Nifty continuing to trade within the broader range, but it has now moved closer to the lower half of this structure. The more immediate concern is the loss of the 23,900–24,000 support levels. The lower Bollinger Band is placed at 23,286, almost coinciding with the week’s low of 23,231, making this region an important near-term technical reference. Therefore, while intermittent technical rebounds cannot be ruled out after five consecutive weeks of decline, they should not be interpreted as a trend reversal unless Nifty first recaptures 23,900–24,000 and subsequently begins moving back above its key weekly averages.The approach for the coming week should remain defensive and selective. With Nifty having broken an important support zone and volatility rising, fresh buying should be highly selective and preferably restricted to stocks displaying strong relative strength. Nifty is oversold on daily charts; therefore, short positions should also not be pursued indiscriminately near supports after an extended five-week decline. Until 23,900–24,000 is reclaimed, the broader strategy should remain one of selling into strength, maintaining modest position sizes, and keeping strict risk controls while adopting a highly stock- specific approach.

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 allthe listed stocks.

The Relative Rotation Graph (RRG) shows a somewhat lack of leadership in the markets. The Nifty Auto, Realty, and Media Indices are inside the leading quadrant. But barring the Auto Index, the other two are seen pairing on their relative momentum against the broader market.

The Nifty Pharma and Midcap Index are inside the weakening quadrant. Of the two, the Midcap 100 Index is showing improving relative momentum. The Nifty Financial Services Index has rolled into the lagging quadrant. The FMCG index and the Infrastructure Index also languish inside this quadrant.

The Energy, Infrastructure, and PSE Indices are also in the lagging quadrant, but they are showing good improvement in relative momentum against the broader Nifty 500 Index. The PSU Bank, IT, Services Sector, and BankNifty Indices are in the improving quadrant of the RRG.

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