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B. Krishnakumar

NIFTY (1902.5)

Preferred view: The market sentiment remained weak during the just concluded week.

The expected short-term bounce towards the 1990-2000 range failed to materialise. The index did, however, fall to the target zone of 1895-1900 range that was mentioned earlier.

The index is perched at a crucial support zone at 1890-1895 band. The Nifty bounced off this level on quite a few occasions in January. A drop below 1885 would be an early indicator of further weakness.

A breach of the 1885 mark could push the index down to the 1820-1825 zone.

On the other hand, if the support zone at 1890-1895 holds, the Nifty would face resistance at 1920-1923 range. A weekly close above 1950 would impart bullishness. Till this threshold is breached, a drop to 1820-1825 range would be the preferred view.

Traders with short positions in the index may have a stop-loss at 1925. Fresh short positions may also be considered on rally, with a stop-loss at 1925. Short positions may also be enhanced, with a close stop-loss, on a drop below 1885.

Comment: The weakness in the banking and old economy stocks dragged the index. Reliance Industries, Tata Steel and State Bank were prominent losers from the ranks of index stocks. The relatively firm trend in Hindustan Lever and a few other FMCG stocks was the only bright spot.

SENSEX (6154.4)

Preferred view: The index moved in line with expectations. The near-term trend is bearish and a drop to 5850-5900 range appears likely. The index faces resistance at the 6220-6230 range. Recent price patterns indicate that the Sensex would struggle to break past this range. A positive trend would emerge if the index closes above 6300.

Comment: As anticipated, the index moved just enough to close the earlier downside gap and resumed the downward trend subsequently. There cannot be a better testimony to the theory of gaps.

Whenever there is a gap or a "falling window" in Japanese Candlestick parlance, a vacuum tends to be created and these gaps tend to act as support/resistance zone subsequently. Prices typically get sucked towards the vacuum created by the earlier gaps and earlier trends resumes once the vacuum is filled. The price pattern in the Sensex is a classic example.

CNX IT (2539.7)

The index does not appear to have completed the earlier downward move. A drop to the 2410-2420 range appears likely. Traders with short positions may have a stop-loss at 2595. Fresh short positions may also be considered on rally, with a stop-loss at 2595. The bearish trend would be reversed on a weekly close above 2600.

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