Bellwether indices Sensex and Nifty 50 zoomed to record highs due to buying interest in large-cap stocks. There could be a minor pause ahead in the coming truncated week. Investors should tread with caution as the indices enter uncharted territory.

Nifty 50 (16,529.1)

The Nifty 50 extended the recent rally after a minor pause at around 16,250 levels and advanced 290 points or 1.79 per cent in the past week. The index climbed 1 per cent on Friday and rules at new highs. It has managed to close above the resistance level of 16,500.

The week ahead : Following a strong breakthrough of the significant resistance in the band between 15,900 and 16,000 in recent times, the index continues to accelerate. This resistance turned support will be a crucial base in the ensuing weeks. Vital support below 15,900 is in place at 15,500 levels which is lower boundary of the sideways movement between June and early August. The index trades well above the 21- and 50-day moving averages. The short-term trend is up now. The daily relative strength index features in the bullish zone and is likely to enter the overbought territory. Besides, the weekly RSI also continues to hover in the bullish zone, backing the uptrend. Further, the daily as well as weekly price rate of change indicators feature in the positive terrain, indicating buying interest.

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The index has reached our near-term resistance mentioned last week at 16,500. What next? The on-going uptrend is likely to extend as long as the index stays above immediate support level of 16,300. It has potential to test resistance at 16,750 on a strong rally above 16,600 levels in the short term. That said, a decisive fall below 16,300 will bring back selling pressure and profit booking could drag the index down to 16,000 levels. We reiterate that a strong decline below the key base in the band between 15,900 and 16,000 can change the short-term uptrend and drag the index lower to the subsequent support in the 15,500-15,600 zone. Supports thereafter are in place at 15,300 and 15,000 levels.

Medium-term outlook : Given the progressing rally, we reaffirm that the medium-term uptrend that started from the April low at 14,151 will remain in place as long as the index trades above 15,000. Only a decisive fall below 15,000 will drag the index lower to 14,800 and then to the subsequent supports at 14,500 and 14,200. Next supports are at 14,000 and in the 13,500-13,600 band.

The key medium-term supports at 15,500 and 15,000 can provide base on a corrective fall below 16,000 levels. On the upside, the index recently surpassed the crucial hurdle at 16,300 which will act as base now. As the index has reached 16,500, it can now progress to 16,700 and 17,000 over the medium term.

Sensex (55,437.29)

The Sensex jumped 1 per cent on Friday and with this rally, it has surged 1,159 points or 2.14 per cent in the past week. It managed to crack the barrier at 55,000. This level will now act as a vital base for the index. The near-term bullish momentum will remain intact as long as the index trades above 55,000. Continuation of the uptrend can take the index northwards to 55,600 and then to 56,000 in the ensuing trading sessions.

A fall below the immediate support level of 55,000 can drag the index lower to 54,500 and then to 54,000 in the short term. We restate that a decline below the key support level of 54,000 can extend the corrective decline further to 53,500 levels. Subsequent supports are at 53,000 and 52,770. The medium-term uptrend that began from the April low at around 47,204 will remain in place as long as the index trades above the psychological level of 50,000. Key supports below 50,000 are placed at 49,500 and 48,700 in the medium term. Investors with a long-term perspective can stay invested with a revised long-term stop-loss at 46,000.

Nifty Bank (36,169.35)

The Bank Nifty advanced 1 per cent last week and tests resistance in the band between 36,000 and 36,200. The index trades well above the 21- and 50-day moving averages. The daily relative strength index has entered the bullish zone from the neutral region. Traders should tread with caution as long as the index tests the aforementioned resistance band. Fresh long positions can be initiated with a fixed stop-loss on a decisive up-move beyond 36,200 levels. In that case the index can trend higher to 36,500 and then to 37,000 levels over the short term. Next resistances are placed at 37,200 and 37,700 levels.

Conversely, plummeting below key base level of 35,500 can pull the index lower to 35,000. Supports thereafter are at 34,500 and 34,000. An emphatic fall below 34,000 will alter medium-term uptrend that started from the April low of 30,405 levels. Next supports at 33,000 and 32,000 will be key levels to note.

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