Index Outlook: Indices test psychological barrier

The Nifty and the Sensex gained amidst choppiness last week. The Centre will be announcing the GDP data for Q3 on Tuesday which could trigger some volatility and lend direction for the indices. February auto sales numbers will also be keenly watched.

Moreover, crude oil which has been testing the key resistance level of $54 for over two months needs to be observed. An emphatic break above $54 can take it higher to $56 levels.

The Nifty 50 index stayed above the key support level of 8,800 and continued its uptrend in the truncated week ago. The index advanced 117 points or 1.3 per cent.

This week: The index inched higher amid intra-day volatility last week. It breached the initial target level of 8,895 and extended its rally. The index now faces a key resistance ahead at 9,000 which is also a psychological barrier. Both the daily and weekly chart indicators and oscillators are featuring in the bullish zone. But the daily indicators showing signs of weakness and negative divergence implying trend reversal, is a cause of worry. This, coupled with the psychological barrier, can weaken the near-term outlook.

Moreover, profit-taking could emerge at around 9,000. Therefore, investors with a short-term perspective should tread with caution and can consider booking partial profits and stay invested with a fixed stop-loss at 8,800 — the immediate key support level. A strong fall below 8,800 will put the index down to 8,725 initially, and then to 8,600 levels in the short term.

If the index manages to hold above 8,800 in the near term, then it can consolidate sideways in the range between 8,800 and 9,000 for a while. An emphatic break-out of the key long-term resistance level of 9,000 can push it higher to 9,119 or 9,172 in the coming months.

Medium-term trend: The index has been on a medium-term uptrend since taking support at 7,900 levels in late December 2016. It hovers well above its 50 and 200-day moving averages. Nevertheless, it faces a key long-term resistance ahead at 9,000. A decisive break above this hurdle can take the index northwards to 9,119, and above 9,200 levels. Key medium-term supports are placed at 8,600 and 8,450. A strong decline below 8,450 will threaten the medium-term uptrend and the index can fall to 8,350 and 8,250 levels.

Last week, the Sensex rose 424 points or 1.5 per cent, decisively breaching the key resistance level at 28,500. The index trades well above its 50 as well as 200-day moving averages. However, it tests a significant resistance level at 29,000. Near-term corrective declines can find supports at 28,750 or 28,500 levels. But a plunge below 28,500 can bring back selling pressure and pull the index down to 28,300 and then to 28,000 in the short term. Next key supports are placed at 27,500 and 27,300.

If the support at 28,500 holds, then the index can re-test resistance level of 29,000. A conclusive break-out of this hurdle will pave the way for an up-move to 29,500 or even to 30,000 in the medium term. Only a conclusive decline below the key medium-term support level of 27,000 can alter the uptrend. Then the index can decline to 26,700 and 26,500 in the medium term.

In the previous week, the Bank Nifty surged 325 points or 1.6 per cent. The index recently breached key resistance at 20,370 and 20,500 levels. Last week, the index tested the support level of 20,500 and managed to resume its up-move. The index can now test its new high of 21,042 recorded in recent times. The indicators in the daily chart are showing signs of weakness and daily relative strength index hovering in the overbought levels implies a possible near-term correction. In such a scenario, the index can decline to 20,500 or 20,370 levels in the near future. Traders with a short-term perspective should tread with care with a fixed stop-loss at 20,450. A strong break-out of the key resistance in the 21,000 and 21,042 range can take the index higher to 21,500 in the short term.

The medium-term trend has been up for the index from last December’s low of 17,606. This uptrend will stay intact as long as the index trades above the key support level of 19,000. Next key supports below 20,370 are at 20,150 and 20,000. A plunge below 20,000 can alter the near-term uptrend and pull the index down to 19,700 and 19,500 levels.

The Dow Jones Industrial Average extended its uptrend by advancing 197 points or 0.96 per cent to close at 20,821 in the prior week and closed at record high. Nevertheless, the indicators in the daily as well as weekly chart continue to feature in the overbought levels which implies a corrective decline cannot be ruled out at this juncture. We reaffirm that a slump below the immediate base level of 20,500 can drag the index down to 20,300 and 20,100 levels in the short term. Resumption of the uptrend can take the index northwards to 20,900 and 21,000 levels in the near term.

The Nasdaq Composite Index inched marginally higher last week and showed signs of weakness. Inability to move beyond the immediate resistance level of 5865 can pull the index down to 5,750 and 5,700 in the short- term. A rally above 5,865 can encounter resistance at 5,900 levels. The Nikkei 225 index continues to test the key resistance level of 19,500. We restate that a strong breakthrough of this resistance is required to take the index higher to 19,700 and 20,000 in the short term. Vital supports are at 19,130 and 19,000.

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