Weekly Outlook: Trend remains positive; Upside momentum may slow down as Nifty nears 10,900

Mumbai: The markets after a shaky start to the week, rebounded into the positive zone and rallied strongly on the back of hopes of a breakthrough vaccine to the Covid-19 pandemic sooner rather than later. Global cues too remained supportive along with domestic fund flows. However, going ahead unprecedented climb in coronavirus cases across the globe and fresh developments on the India-China border issue may limit further upside.  

In the week under review, the BSE benchmark index, the Sensex, slipped to a low of 34,662 early in the week. The BSE index, thereafter, recouped the losses and rallied to a high of 36,110 on Friday – an intra-week gain of 1,448 points. Buying was seen across the board in the Sensex stocks. The Sensex finally ended the week with a gain of 2.4 per cent (850 points) at 36,021.

Among the Sensex 30 stocks, HDFC, ITC and Mahindra & Mahindra surged around 6 per cent each. TCS, Bharti Airtel, ICICI Bank, Maruti, HCL Technologies, Reliance, Bajaj Auto, Infosys, Tata Steel and HDFC Bank gained 2-4 per cent each. On the other hand, NTPC, ONGC, Larsen & Toubro, PowerGrid and IndusInd Bank were the prominent losers.

The Sensex has started the month of July on a bullish note, but is yet to give any indication on the monthly Fibonacci chart. The BSE index has already clocked a gain of 1,000 points so far this month. The monthly Fibonacci charts indicate resistance around 36,200-36,600-37,000. One may note that, 37,200-level is also a key hurdle as per the yearly Fibonacci chart, above which the Sensex can rally up to 38,000-38,760.

Also Read: Market Outlook: Expect some profit-taking in case BSE Sensex fails to sustain above 35,920

As per the weekly Fibonacci charts, next week, in case of an up move, the BSE Sensex may face resistance around 36,575-36,745-36,915, and in case of a down move the BSE index is likely to seek support around 35,470-35,300-35,125. Going ahead, the market may witness limited upside, with more time spent in consolidation and side-ways movement.

The NSE Nifty gained 2 per cent to end at 10,607 and has now gained more than 6 per cent in the last three straight weeks. In the process, the Nifty has also achieved its peak last seen in the first week of March 2020. Ever since, the NSE index broke above its 20-WMA (Weekly Moving Average), the index has seen a steady climb towards the 11,000-mark, where there are multiple hurdles.

With the trend being positive on the daily and the weekly charts, the bias continues to remain positive, although we may see the momentum slowing down as indicated by select key momentum oscillators. The short-term support for the Nifty has now risen higher to 10,300-odd levels.

As per the daily charts, the NSE Nifty may target its 200-DMA (Daily Moving Average), which is currently a shade below 10,900. As per the weekly charts, the Nifty may target its 50-WMA (Weekly Moving Average) or its 100-WMA which is currently placed around 10,910 and 11,040, respectively in the coming weeks.

Among the key momentum oscillators on the weekly charts – the MACD (Moving Average Convergence Divergence) continues to remain positive. The Slow Stochastic, albeit positive, has now reached overbought territory. The DI (Directional Index) is seeing convergence of the bulls and bears, with the (ADX) Average Directional Index weakening, signaling the possibility of choppy movement in the weeks to come. The RSI (Relative Strength Index) remains in neutral mode.

Disclaimer: The views expressed in this article are personal and for information purpose only, it does not advocate any buy or sell /recommendation.