Weekly Outlook: Short-term bias seems negative; 11,650 likely to be major hurdle for Nifty

@rex_cano

Mumbai: The markets reversed course sharply after hitting fresh six-month highs in the opening trades on Monday. Reports of tension at the India-China border in Ladakh dampened the sentiment. The markets suffered a fresh jolt on Friday owing to weak cues from the US markets, this accentuated the selling pressure in our markets.

The BSE benchmark index, the Sensex, had briefly pierced the 40,000-mark and registered a fresh six-month high at 40,010 in opening trades on Monday. The BSE index, thereafter, nose-dived by over 1,500 points and exhibited lackluster movement in mid-week trades. Fresh sell-off on Friday saw the BSE index tank to a low of 38,250 – down a whopping 1,760 points from the week’s high. The Sensex eventually ended the week with a loss of  2.8 per cent (1,110 points) at 38,357.

Among the Sensex 30 stocks, Axis Bank tumbled nearly 11 per cent. ICICI Bank, SBI, Sun Pharma, NTPC, IndusInd Bank, Kotak Mahindra Bank and HDFC plunged 6-9 per cent each. Hero MotoCorp, ITC, Bajaj Auto, PowerGrid Corporation, Larsen & Toubro and ONGC were the other major losers. On the positive side, TCS and Maruti Suzuki were the only notable gainers, up 2.4 per cent and 1.3 per cent, respectively.

Also Read: Market Outlook: Markets awaiting a breakout; short-covering likely above 11,650

After three successive months of gains, the BSE Sensex has started September on a slippery note. As per the monthly Fibonacci chart, the BSE index seems to be facing some resistance around 39,300-odd level. Going ahead, as long as the BSE index remains below 38,630, the Sensex may test its key monthly support around 37,450-37,080-36,710. In the interim, the BSE index has a minor support around 37,950.

As per the weekly Fibonacci chart, next week, in case of an up move the BSE index may face resistance around 39,030-39,240-39,450. Whereas, in case of a decline the Sensex is likely to seek support around 37,690-37,480-37,270.

The NSE Nifty shed 2.7 per cent at 11,334 this week. The index has formed a bearish engulfing pattern on the weekly charts, which tends to be a sign of reversal after a prolonged up move. Hence, going ahead the bias for the Nifty is likely to remain bearish as long as the NSE index remains below 11,650.

On Friday, the Nifty also ended below its 20-DMA (Daily Moving Average) on the daily charts. As per the daily charts, the NSE index may now slide towards the lower-end of the Bollinger Band around 11,160 or its 50-DMA at 11,100. As per the weekly charts, the Nifty has strong support around 11,030-odd level, which is its 100-WMA (Weekly Moving Average).

Among the key momentum oscillators on the weekly charts, the Slow Stochastic has given a negative divergence. However, the DI (Directional Index) and the MACD (Moving Average Convergence Divergence) continue to remain positive. The RSI (Relative Strength Index) is in the neutral zone.

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