[Premium] Three Charts For The Week Ahead

JC Parets
October 17, 2021

We retired our "Five Bull Market Barometers" in mid-July last year to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

Last week we focused on Crude Oil, Nifty Auto and Nifty Energy relative to Nifty 100.

Let's move into this week's topics.

1. The first chart we’re tracking this week is MCX iCOMDEX Composite Index. It consists of 11 commodity futures traded on MCX corresponding to physical market size in India. This week, it broke above a multi-year base and closed above its 2018 high. And the move was confirmed by an overbought momentum reading, indicating increasing aggressiveness on the buyer's side.

Furthermore, Nifty Metal made a new all-time high after consolidating above the 2008 highs for the past few months.

These resolutions are evidence that our thesis of commodity supercycle is still intact. We want to look for opportunities in commodity space if we continue to remain above these levels.

2. The second chart we’re looking at is the Nifty Bank and Nifty Auto Index with a ratio chart of Nifty High Beta 50 vs. Nifty Low Volatility 50 index. Last year the less risker, low volatile names bottomed out in March 2020. The entire run-up was a high beta chase, whereby we saw these high beta stocks outperform by a wide margin.
This up-move paused in February when we witnessed consolidation in Bank and Auto indices. Now both are trading above the key levels and the ratio is moving high too.
This sets the appetite for risker assets. Our bias is positive as long as Bank and Auto remain above February highs.

3. The third chart we're tracking is the Nifty PSU Bank Index. The price broke out above the resistance of 2,620 at its third attempt. With this move, we have a two-year base breakout at our hands.
If the price trades above 2,620 level, we’re bullish on PSU Banks for a target of near 3,730. This move is the beginning of a long-term trend reversal. This also signifies a rotation into weaker sectors like PSU that haven’t participated with gusto in the market rally so far.

In our view, these charts will help set the tone for this week and provide us with information on how we should approach the market in the coming weeks.

Also, make sure to check out our other weekly post, "Trade Of The Week."

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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