The presence of several bullish continuation patterns had convinced us to stay on course with the 11300 target last week. Though this stands achieved, the trend is yet to show signs of crack. Nifty IVs are nowhere near peaks, suggesting that shorts if any, will have to be carefully managed. OTM strikes of Nifty, as well as actively traded stocks, are showing significant activity, mostly due to seeing a new peak in Nifty, the beginning of the August series, and also due to the several events scheduled ahead including RBI and FOMC meets. The task next week, hence would be about managing downsides fears, while still being committed to the long side. An exhaustion gap would be formed if 11220/11080 is revisited, and that is where we would want our stop loss to be. But, until then, aim for the nearest objective of 10470 and a new trading range of 11300-11700.
Relative Rotation Graph shows that PSU sector is the most improved lot, while energy sector is looking to lose the performer tag. FMCG continues to weaken and is not surprising given its lofty valuations. Pharma is still struggling, but the rate of improvement is indicative towards potential jumps soon. IT stocks are are caught in a range, and can surprise. With several key US event risks ahead, US dollar is likely to make significant moves, and rupee could give some momentum to pharma or IT stocks.
Posted: July 2018