Technical Analysis

Index Outlook | Sensex, Nifty 50 face key barriers ahead

Yoganand D | Updated on November 21, 2020 Published on November 21, 2020

Last week, the benchmark indices climbed higher marginally. Stay alert

Both the Sensex and the Nifty 50 managed to climb in the midst of volatility last week. This choppiness can continue in the coming week as the index heads into the week of November month derivatives expiry.

Rupee movement against the greenback, crude oil price action and Covid vaccine hopes are the key things to watch out for in the coming week. US GDP data and FOMC (Federal Open Market Committee) minutes are the key global events to note.

Nifty 50 (12,859)

After an initial rally, the Nifty 50 index recorded a new high at 12,963 and began to decline.

Friday’s rally of 0.68 per cent helped index finish the truncated week higher, by gaining 0.6 per cent.

Week ahead: Since the index took support at around 11,790 in late September, it has been in a short-term uptrend. But it faces a key psychological resistance ahead at 13,000. The index has an immediate support at 12,700.

The daily relative strength index (RSI) has corrected from the overbought territory and the weekly RSI features in the bullish zone. A decisive fall below the immediate support level of 12,700 can extend the corrective decline to 12,500 levels.

An empathic fall below the crucial base level of 12,500 can pull the index lower to 12,250 and 12,000 levels in the near term.

A further slump below the psychological support level of 12,000 can bring back selling interest and will start deteriorating the short-term uptrend. The next key supports below 12,000 are placed at 11,800 and 11,600 which can come into play thereafter.

On the other hand, a conclusive break above the current resistance at 12,900 and then 13,000 can push the index higher.

In that case, the index can prolong the uptrend to 13,200 initially and then to 13,500 level over the short to medium term.

Medium term: There is no change in the intermediate-term uptrend that has been in place since the March low of 7,511. We reiterate that the index faces a key medium-term hurdle ahead at 13,000.

A clear breakthrough of this level will underpin the primary uptrend and take the index higher to 13,200 and then to 13,500 levels.

Conversely, if the index decisively falls below the vital support level of 12,000, it can bring back selling pressure and drag it lower to 11,800 initially and then to 11,500 over the medium term. The next crucial support for the index is at 11,000.

Sensex (43,882.2)

The index was choppy in the past week and advanced marginally by 0.56 per cent. It recently recorded a record high at 44,230 levels.

The Sensex tests a significant barrier at 44,000. A clear break above this resistance can pave the way for an up-move to 44,230, 44,500 and then to 45,000 levels in the ensuing weeks.

The daily as well as the weekly RSI features in the bullish zone, backing the up-move.

But if the index fails to move beyond the current resistance level of 44,000, it can bring back selling interest and drag the index lower to 43,500.

A further decline below this base can pull the index lower to 43,000 levels. Supports thereafter are placed at 42,500 and 42,000.

A decline below these supports can pave the way for a down-move to 41,500 and then to 41,000.

The next key support is at 40,000. Investors with a long-term perspective can stay invested with a stop-loss at 37,000.

Nifty Bank (29,236)

The Nifty Bank index extended the rally and has gained consecutively over the past three weeks.

Amid volatility, the index advanced 641 points, or 2.2 per cent, last week.

The index tests a key resistance at 29,750 and has the next crucial resistance nearby at 30,000.

The daily RSI is displaying negative divergence, indicating that a near-term correction is on the cards. Therefore, traders should tread with caution in the coming weeks.

A plunge below the immediate support level of 28,500 can pull the index lower to 28,000 in the short term. An emphatic downward breakthrough of 28,000 can drag the index down to the next crucial support levels of 27,000 and then to 26,000 levels. On the upside, the significant resistance level of 30,000 can limit the rally temporarily and lead to correction in the form a sideways movement or a corrective decline.

That said, a conclusive break above 30,000 can take the index northwards to 30,500 and then to 31,000 levels. Traders with a short-term perspective should tread with caution as long as the index trades above the immediate base level of 28,500.

We restate that the short-term uptrend that commenced from the September low of 20,404 will stay in place as long as the index trades above the support of 26,000. The next supports are at 25,500 and 25,000.

 

Global cues

The Dow Jones Industrial Average index was choppy and declined 216 points, or 0.73 per cent, in the previous week to 29,263.5.

The index continues to face a key resistance ahead at 30,000 while testing the immediate resistance at 29,500.

A slump below the immediate support level of 29,000 can drag the index lower to 28,650 in the coming week. Major supports below 28,650 are at 28,500 and then 28,360 levels. On the other hand, a break above the near-term resistance level of 30,000 can push the index higher to 30,300 and then to 30,500.

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Published on November 21, 2020
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