Synopsis : After a volatile end to the week, market participants will closely watch the pharma sector for signs of leadership. Technical indicators suggest Nifty Pharma may be approaching a breakout, supported by broad-based participation and short covering activity. Meanwhile, Nifty Metal remains under pressure following a bearish technical setup. Here’s what traders should track heading into Monday’s session.
Despite Friday’s sharp gap-down opening, the market managed to recover a large portion of its losses during the second half of the session, helping preserve the broader bullish structure. The recovery comes alongside improving derivatives positioning, with Foreign Institutional Investors (FIIs) reducing short positions in index futures by nearly 6% week-on-week.
Notably, 79.4% of Nifty 500 stocks continue to trade above their respective 10-day moving averages, indicating underlying market strength despite recent volatility.
Nifty Pharma: Breakout setup taking shape
The pharma sector is emerging as one of the strongest areas on the charts.
Nifty Pharma has formed a weekly pinbar doji pattern, often considered a sign of rejection from lower levels and increasing buying interest. On the daily chart, the index is approaching a key downward-sloping trendline resistance. A decisive breakout above this level could confirm a near-term trend reversal.
Momentum indicators are also showing improvement. The MACD histogram is contracting, suggesting that bearish momentum is fading and increasing the probability of a bullish crossover.
Derivatives data adds further support to the positive outlook. Nearly 90% of pharma stock futures witnessed either long buildup or short covering in the latest session, while around half of the sector's constituents saw short covering on a weekly basis.
Stocks likely to remain in focus include:
- Biocon
- Sun Pharmaceutical Industries
- Aurobindo Pharma
- Laurus Labs
- Lupin
If the sector sustains its momentum and breaks above resistance, Nifty Pharma could potentially move towards the 24,900 zone in the near term.
Nifty Metal: Weakness continues
In contrast, Nifty Metal continues to show signs of weakness after facing rejection near the upper end of a widening wedge pattern.
The index has erased recent gains and is now accompanied by a bearish weekly MACD crossover, indicating fading upward momentum and increasing downside risks.
Immediate support is seen around 12,400. A breakdown below this level could open the path towards the next support zone near 11,900.
Derivatives positioning also remains negative, with nearly 70% of both in-the-money and out-of-the-money call strikes witnessing fresh short buildup, reflecting cautious sentiment among traders.
Unless the index reclaims key resistance levels, the prevailing market view remains tilted towards a sell-on-rise strategy for metal stocks.
What traders should watch on Monday
With FIIs covering shorts and the broader market holding above key support zones, the pharma sector appears well-positioned to lead any potential recovery. Biocon and other pharma names could remain in focus if sectoral momentum continues.
On the other hand, weakness in metal stocks may continue to weigh on sentiment unless fresh buying emerges at lower levels.
Disclaimer : This article is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or a solicitation to buy or sell any securities. Technical analysis, derivatives data, and market observations are subject to change and may not accurately predict future price movements. Investors and traders should conduct their own research and consult a SEBI-registered financial advisor before making any investment decisions. Equity market investments are subject to market risks.
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