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Weekend Rundown: Brace the Consolidation
When it comes to the stock market, consolidation is a term that is often thrown around, but not always fully understood. Put simply, consolidation occurs when there is a period of time in which a price moves within a relatively narrow range, without any significant uptrends or downtrends. While it may seem like nothing is happening during this time, consolidation can actually be a crucial phase for market participant to pay attention to.
The Nifty 500 index reached its peak in October 2021 and has been experiencing a period of indecisiveness since then. In November 2022, an attempt at a breakout failed to materialize. To gauge market sentiment, the high-low index - calculated using the simple moving average of the number of stocks at their 52-week high and low - is currently at its lower end. This suggests that the broader market may find support at the 14,200 level.
In our analysis, we will now focus on the top 10 stocks index, which have a significant impact on the overall performance of the Nifty 50. At present, this index is finding support from both the 200-day simple moving average and the Anchored VWAP from the market low in June 2022. This development is particularly noteworthy as it coincides with the confluence of polarity level. Therefore, closely monitoring the behaviour of these top-weighted stocks - which account for 60% of the Nifty 50 - can provide valuable insights into the market's overall direction.
In this section, we will examine sectors that are currently trading at significant long-term support levels. The Nifty Auto sector, in particular, is worth noting as it is currently trading slightly above the level of a major base breakout. As long as the sector manages to remain above this level, it will likely continue to be considered a strong contender in the market.
Like the Nifty Auto sector, the Nifty Realty sector is also trading just above the key base breakout level that was established during the 2018 highs. This presents an intriguing development to keep a close eye on, as it may have significant implications for the future trajectory of the sector.
Here Nifty Energy is at the short-term support level at 21,800.
The metals sector is notorious for its high volatility, with prices exhibiting significant fluctuations over time. The current price level is particularly noteworthy, as it holds a significant amount of historical data. In fact, when compared to the Nifty 100 index, the metals sector has shown a halt in outperformance at the crucial 2018 highs. This indicates that careful consideration should be given to trading strategies in this sector, as it may be experiencing a shift in market dynamics.
Similar to Nifty Auto, Apollo Tyres has key support at 2018 high with clear risk-reward levels.
What’s the best sector now? I say it’s capital Goods.
Here Finolex Cables provides a clear level to be upbeat about.
The smoking hot big base breakout!
Can’t go wrong if it holds 161.8% Fibonacci extension.
The overall sentiment in the Nifty 750 stocks suggests that there is currently a lack of bullishness, as evidenced by the lower extreme in Nifty 500's High Low index. As a result, it appears that we can expect a prolonged period of consolidation until a clear directional trend emerges.
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