Early signs of trend reversal seen, confirmation awaited
Mumbai: The markets extended its winning streak to the fifth straight week amid high amount of volatility as key benchmark indices tested major resistance levels. Global cues, earnings season and domestic news flow were the major triggers this week.
In the week under review, the BSE benchmark index, the Sensex, after a positive start witnessed a mid-week correction wherein the BSE index dropped to a low of 35,877. However, a strong recovery thereafter mainly on account of aggressive buying in metals and IT shares saw the BSE index surge to a high of 37,126 – up 1,249 points from the lows of the week. The Sensex eventually ended the week with a gain of 1.2 per cent (426 points) at 37,020.
Among the Sensex 30 stocks, Infosys zoomed over 15 per cent on the back of better-than-expected Q1 results. HCL Technologies, Mahindra & Mahindra, Hindustan Unilever, Tata Steel and Bajaj Auto rallied 3-7 per cent each. On the other hand, PowerGrid Corporation shed 5.5 per cent. HDFC, SBI, IndusInd Bank, NTPC and ICICI Bank declined 2-4 per cent each.
The Sensex has reaffirmed its bullish bias on the monthly Fibonacci chart, by crossing the monthly R3 placed at 36,990. As per the monthly Fibonacci chart, the bias for the remainder of the month is likely to remain bullish as long as the BSE index sustains above 35,650-level. The BSE index can expect intermediate support around 36,600 and 36,200.
Also Read: Market Outlook: Sensex to remain negative below 36,600
As per the yearly Fibonacci chart, the BSE Sensex has a near resistance around 37,200-odd level, above which the index can rally towards the 38,000-mark. As per the weekly Fibonacci charts, next week, in case of an up move, the BSE Sensex may face resistance around 37,500-37,640-37,790, and in case of a down move the BSE index is likely to seek support around 36,545-36,395-36,250.
With this week’s 1.2 per cent gain at 10,902, the NSE Nifty has gained near about 1,000 points in the last five straight weeks. More importantly, the NSE index has surpassed two major hurdles this week, the 200-DMA (Daily Moving Average) at 10,870 and 50-WMA (Weekly Moving Average) at 10,895. The next significant hurdle for the Nifty is placed at 11,030, which is the 100-WMA, above which the Super Trend line resistance around 11,140 and the higher-end of the Bollinger Band at 11,280.
One major worry for the bulls going ahead can be the formation of the ‘Hanging Man’ pattern on the weekly charts. This particular pattern after a rally resembles the possibility of a trend reversal in near future. For confirmation of trend reversal, the Nifty would need to break and close below this week’s low (10,560) or we need to keep an eye on other technical indicators.
Among the key momentum oscillators on the weekly charts, the DI (Directional Index) has turned marginally positive. The MACD (Moving Average Convergence Divergence) is also positive, while the Slow Stochastic is slightly inconclusive. The RSI (Relative Strength Index) is in favour of the bulls.
Disclaimer: The views expressed in this article are personal and for information purpose only, it does not advocate any buy or sell /recommendation.
