Market Outlook: Expect buying to emerge on dips; Sensex may re-test the weekly high

Mumbai: The markets 4-day rally came to a halt owing to profit-taking at higher levels. The BSE benchmark index, the Sensex, had started the day with a positive gap of 250-odd points at 35,680. The index soon touched a high of 35,706 and slipped into the negative zone. The index, thereafter, rebounded into the positive zone and attempted to re-test the morning highs, however, the recovery was short-lived as the BSE index slipped back into the negative terrain.

Aggressive profit-taking towards the end of the day saw the Sensex slide to a low of 34,795 – down 912 points from the day’s high. The Sensex finally ended the day with a loss of 561 points at 34,869.

Among the Sensex 30 stocks, IndusInd Bank and ICICI Bank were the major losers, down nearly 7.5 per cent each. PowerGrid, Bajaj Finserv, Axis Bank, SBI, HCL Technologies, NTPC, Bharti Airtel, Sun Pharma, Kotak Bank, UltraTech Cement, Bajaj Finance and ONGC dropped 3-5 per cent each. On the positive side, Asian Paints and ITC rallied 3.7 per cent and 3 per cent, respectively. Nestle was the other prominent gainer.

Also Read: Market Outlook: Nifty needs to sustain above 10,500 for further gains

The market seems poised for tremendous action in the remainder of the week, as the BSE Sensex declined today after giving a fresh buy signal on the weekly Fibonacci charts, by crossing the weekly R2 level at 35,700. This indicates that the Sensex is likely to seek support at lower levels and attempt a fresh dash towards the weekly high.

As per the weekly Fibonacci charts, the BSE index may seek support around 34,310-34,000-33,770-33,540. On the upside, the BSE index may target the weekly R3 at 35,920. Similarly, as per the daily Fibonacci charts, on Thursday, in case of an up move the BSE Sensex is likely to face resistance around 35,220-35,325-35,430, and in case of a down move, the BSE index may seek support around 34,520-34,415-34,310.

The NSE Nifty, as indicated yesterday, started weakening after it failed to sustain above 10,500-level. The index has now precisely tested the higher end of the Bollinger Band on the daily charts with its high today at 10,553-odd level. Going ahead, this could act as a temporary resistance, till the time the NSE index consolidates and gathers fresh strength. In case of decline, the NSE index is expected to find strong support around the 10,050-odd level.

Also as explained yesterday, the Nifty needs to break and close above the 10,500-level, for the index to continue its upward journey towards the 200-DMA (Daily Moving Average) at 10,900. In the interim, the broader trading range has now moved considerably higher to 9,500-10,500, with intermediate support around 10,050 and 9,750.

Among the key momentum oscillators on the daily charts, the DI (Directional Index) continue to remain in favour of the bulls, hence the probability of pull back seems higher. The Slow Stochastic is showing some signs of tiredness, while the MACD (Moving Average Convergence Divergence) has turned neutral. The 14-day RSI (Relative Strength Index) is also cooling off after nearing overbought levels.

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