[Premium] Three Charts For The Week Ahead

JC Parets
September 20, 2022

We retired our "Five Bull Market Barometers" in 2020 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 AUDJPY, Nifty Mid-Cap 100 and Nifty PSU Bank.

Let's move into this week's topics. We have big, important moves to track this week.

1. The first chart we’re looking at is Nifty 500. Earlier, we discussed the critical resistance for the Nifty 500 at the 423.8% Fibonacci extension at 15,650. Last week Nifty 500 retested this level and couldn't break through. While Nifty500 marked a new 52-week high, average stocks didn’t form a higher number of new 52-week highs. This is reflected in the High Low index, which is the 20-day SMA of stocks forming new 52-week highs and new 52-week lows. This divergence indicates a short-term bearish bias for the broader market if the price continues to sustain below 15,650.

Click on the chart to zoom in.

2. The second chart we're looking at Nifty IT relative to Nifty 100. We know that IT has been making lower highs and lower lows since January this year. IT has been an underperformer all year. While the absolute price chart gives us an idea about the levels to follow, it is the relative strength chart that paints a more grim picture.
The ratio chart is currently holding on to a long-term support zone that goes back all the way to 2008. This is a crucial level given how precariously IT is placed. A breakdown here would push IT into a strong bear market grip. We're keeping an eye on this one.

3. The third chart we're looking at is Nifty Bank relative to Nifty 100. Banks have participated in the current market rally as they should. What's interesting is that on a relative basis, the ratio chart is trading at a 52-week high. While that is positive for the sector, it is trading close to its overhead resistance as well. A breakout will be on the cards only if the momentum continues to gain strength. If not, we're looking at a range-bound move going forward.

In our view, these charts will help set the tone for this week and provide 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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