Weekly Outlook: Medium-term trend turns positive; Nifty likely to test 12,150

@rex_cano

Mumbai: The markets had a rollicking week, as the key benchmark indices not only ended with smart gains throughout the trading week but also scaled fresh six-month highs. The rally was largely driven by strong FII flows, positive global cues and short-covering by the bears. The markets now seem to be closing-in towards its life-time high.

In the week under review, the BSE benchmark index, the Sensex, climbed higher highs as the week progressed and registered a fresh six-month high at 40,585. The Sensex finally ended the week with a solid gain of 4.7 per cent (1,812 points) at 40,509. The BSE index is now just 4.4 per cent away from its life-time peak at 42,274.

Among the Sensex 30 stocks, TCS and HDFC Bank zoomed 11.5 per cent each. HDFC, Infosys and ICICI Bank soared around 9 per cent each. Axis Bank, HCL Technologies, IndusInd Bank, SBI, Maruti Suzuki, Mahindra & Mahindra, Bajaj Auto and Hindustan Unilever were the other prominent gainers. On the flip side, PowerGrid Corporation and Bajaj Finance declined around 4 per cent each. NTPC, ITC and Bharti Airtel were the other notable losers.

Also Read: Market Outlook: Markets may soon take a breather

The BSE Sensex which, last week, had given a minor buy signal on the monthly Fibonacci chart has now given a stronger buy signal on the same. As per the monthly Fibonacci chart, the bias for the rest of October is likely to remain bullish as long as the BSE index sustains above 39,840. In case, 39,840 is breached the Sensex may find considerable support around 39,160-38,700.

On the upside, the BSE index is now within striking distance of its quarterly Fibonacci R2 (resistance) placed at 40,600, above which the next target will be 41,200. The Sensex may take a pause around the 41,200-41,250 level, before making an attempt to reach its life-time peak.

As per the weekly Fibonacci chart, next week, in case of an up move the BSE index may face resistance around 41,180-41,400-41,600. In case of a decline the Sensex is likely to seek support around 39,840-39,630-39,420.

The NSE Nifty recorded a fresh six-month high at 11,939 and ended the week with a gain of 4.4 per cent at 11,914. The NSE index too is now 500-odd points shy from its all-time high at 12,430. While the NSE index seems overbought on the daily charts, there are some significant positive developments on the weekly charts.

For the first time since March 2020, the 20-WMA (Weekly Moving Average) has crossed above its 50-WMA, which is a positive sign. It also indicates that the medium-term trend is now positive as well. Also, select key momentum oscillators like the DI (Directional Index) and the Slow Stochastic have given a fresh positive divergence. The MACD (Moving Average Convergence Divergence) too remains in favour of the bulls.

Going ahead, the NSE index seems on course to test the higher-end of the Bollinger Band indicating an upside target of 12,150. The only worry for the near-term seems the overbought signs on the daily charts, wherein the 14-day RSI (Relative Strength Index) and Slow Stochastic are showing some signs of tiredness. However, in case of decline the NSE index is likely to find strong support around 11,600-level.

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