Weekly Outlook: Time to be cautious as Nifty nears multiple resistance zone; global cues crucial

Mumbai: The markets ended higher for the fourth straight week amid some choppy trades in the latter half of the week as the key benchmark indices neared key levels on the daily and weekly charts. The positive momentum was driven by liquidity push, de-escalation of troops at the India-China border, strong global cues and hopes of a vaccine for coronavirus. Going forward, global cues and fears of a possible second wave of the pandemic Covid-19 would have a major bearing on the markets.

In the week under review, the BSE benchmark index, the Sensex, started the week with a positive gap of 300-odd points and more or less defended its Mondays low throughout the week despite bouts of profit-taking. The BSE index touched a high of 36,828, but eventually ended the week at 36,594 – up 1.6 per cent (573 points).

Among the Sensex 30 stocks, Bajaj Finance and IndusInd Bank soared over 10 per cent each. SBI, Reliance, Mahindra & Mahindra, Sun Pharma, HDFC Bank, Tata Steel, Axis Bank, Infosys and Hindustan Unilever were the other major gainers. On the other hand, ITC tumbled over 6 per cent. ONGC, NTPC and PowerGrid were the prominent losers, down over 2 per cent each.

The Sensex, so far this month, has maintained a positive stance on the monthly Fibonacci chart, and crossed the monthly R2 level at 36,600, thus indicating a likely possibility of the BSE index testing the monthly R3 at 36,990, above which the next significant hurdle could be 37,220 – as per the yearly chart.

Also Read: Market Outlook: Nifty likely to break above the 200-DMA soon

As per the weekly Fibonacci charts, next week, in case of an up move, the BSE Sensex is likely to face resistance around 36,820-36,890-36,960, and in case of a down move the BSE index may seek support around 36,365-36,300-36,225, below which the next major support is around 35,650.

With this week’s 1.5 per cent gain at 10,768, the NSE Nifty has gained as much as 8 per cent in the last four straight weeks. The NSE index is now within striking distance of key multiple resistances in the form of 200-DMA (Daily Moving Average), 50-WMA (Weekly Moving Average), 100-WMA and the Super Trend line in the 10,880-11,140 zone. Hence, one needs to remain cautious at higher levels given the multiple resistances and keep a close eye on global cues for direction.

Given the positive bias on key momentum oscillators, it seems quite likely that the Nifty may spend time trading side-ways as it battles the resistance zone. For now, it seems like the lower end of the trading range for the Nifty has moved higher to 10,500, below which strong support can be expected around the 20-DMA around 10,350-odd level.

Among the key momentum oscillators on the weekly charts – the DI (Directional Index) has given a mild positive crossover. The MACD (Moving Average Convergence Divergence) continues to remain positive, recovering from the oversold zone. The Slow Stochastic, however, is showing some signs of tiredness, while the RSI (Relative Strength Index) continues to remain 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.