Weekly Outlook: Upside for the Sensex may be capped around 40,500-40,600

@rex_cano

Mumbai: The markets after a steady start to the week experienced high volatility in the latter half of the week owing to profit-taking at higher levels. Also, reports of fresh time-bound restrictions owing to the Covid-19 virus in select European countries dampened sentiment. However, on the positive front IT companies largely reported strong Q2 performance.

In the week under review, the BSE benchmark index, the Sensex, briefly soared past the 41,000-mark to touch a high of 41,048, but soon crumbled thereafter. The selling pressure was so intense that the BSE index tumbled to a low of 39,667 – down nearly 1,400 points in intra-day trades. However, Friday brought some respite as the BSE index recouped some of its preceding day losses and eventually ended the week at 39,983 – down 527 points.

Among the Sensex 30 stocks, Bharti Airtel and Sun Pharma plunged over 5 per cent each. ONGC, Mahindra & Mahindra, Yes Bank, HCL Technologies, NTPC, HDFC Bank, Bajaj Finance, Reliance Industries, IndusInd Bank, Maruti Suzuki and TCS shed 2-4 per cent each. On the positive side, Tata Steel surged 6.5 per cent. Infosys, Kotak Mahindra Bank and Axis Bank were some of the notable gainers.

Also Read: Market Outlook: Further weakness can push Nifty towards its 20-DMA

The BSE Sensex has retreated after testing higher levels, closer to the major quarterly and yearly Fibonacci resistance levels. However, since the bias as per the monthly Fibonacci chart is positive, the BSE index may seek support around 39,500-39,160-38,700. On the upside, the BSE index may face some resistance around the 40,500-40,600 level this week. The BSE index needs to sustain consistently above 40,600 in order to resume its uptrend.

As per the weekly Fibonacci chart, next week, in case of an up move the BSE index is likely to face resistance around 40,510-40,670-40,840. In case of a decline the Sensex may find support around 39,460-39,290-39,130.

The NSE Nifty rallied past the 12,000-mark and registered a high at 12,025, but could not sustain above it for long. The Nifty finally ended the week with a loss of 1.3 per cent at 11,762. As per the weekly Bollinger Bands the NSE index is expected to move in a broad band of 10,000-12,150. The NSE index is now somewhere near the higher end of the anticipated trading band.

The medium-term trend, which turned positive last week continues to remain in favour of the bulls, as the 20-WMA (Weekly Moving Average) at 11,060 is fairly above the 50-WMA at 10,930. However, since select momentum oscillators are showing mixed signs on the daily charts the markets may continue to remain volatile in the near term, with slight downward bias.

Among the key momentum oscillators on the weekly chart, the DI (Directional Index), the Slow Stochastic and the MACD (Moving Average Convergence Divergence) are all clearly in favour of the bulls. The 14-day RSI (Relative Strength Index), however, is in the 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.