Technical Analysis

Index Outlook | Sensex, Nifty 50 ruling at new highs

Yoganand D | Updated on November 15, 2020 Published on November 15, 2020

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Sensex, Nifty 50 continued to forge ahead last week; however, stay watchful

The domestic benchmark indices — the Sensex and the Nifty 50 — extended their rally and scaled new highs in the Muhurat trading session. The indices moved up amid weakening rupee against the dollar and increasing CPI (consumer price index) as well as food inflation.

In the coming week, WPI (wholesale price index) inflation data, rupee movement and Covid-19 vaccine hopes can set the tone for the market.

On the global front, the US industrial production data and retail sales are key.

 

Nifty 50 (12,780.2)

Last week, the Nifty 50 index extended its rally, breaching a key resistance at 12,500. It jumped 516 points, or 4.2 per cent.

Week ahead: The index has been on a short-term uptrend since it took support at around 11,790 in late September.

After a corrective decline below 12,000 levels in October, the index continued to trend upwards in early November and conclusively breached this barrier and extended the upmove.

The Nifty 50 registered a new high at 12,828 in the Muhurat trading session.

The daily relative strength index (RSI) is hovering in the overbought territory and the weekly RSI is likely to enter the overbought territory. Besides, the index is testing the upper boundary of the Bollinger Bands; clubbed with RSI, a near-term correction cannot be ruled out at this juncture.

In that case, the index can decline to the immediate support level of 12,500. The subsequent supports are at 12,250 and 12,000 levels. A decisive fall below the psychological support level of 12,000 can bring back selling interest and will start weakening the short-term uptrend.

An emphatic decline below this base can drag the index lower to 11,800 and then to 11,600 over the short term. The next supports are at 11,400 and 11,200.

On the upside, the index can encounter a resistance ahead at 12,900 and then at 13,000 in the coming weeks. A conclusive breakthrough of 13,000 can pave the way for an upmove to 13,200 and then to 13,500 level over the short to medium term.

Medium term: Since the March low of 7,511, the Nifty 50 has been on an intermediate-term uptrend. The index faces a key medium- term barrier ahead at 13,000. A strong breakout of this level can strengthen the uptrend and take the index northwards to 13,200 and then to 13,500 levels.

A plunge below the key support level of 12,000 can witness a corrective decline to 11,800 and then to 11,500. A further decline below these supports can pull the index down to 11,000 over the medium term.

Sensex (43,637.9)

The Sensex also gained 1,744 points, or 4.2 per cent, decisively breaking through key barriers at 42,000 and 43,000 levels last week. It recorded a new high at 43,830.9 on Muhurat day

Although the short-term trend is bullish, the index faces a crucial resistance ahead at 44,000.

An emphatic breakthrough of 44,000 is needed to strengthen the uptrend and take the index higher to 45,000 over the short term.

Having said that, the daily RSI features in the overbought territory, displaying a minor negative divergence.

Hence, a near-term corrective decline cannot be ruled out.

Immediate supports at 43,000 and then 42,500 can provide base if the index witness a corrective decline. A strong slump under the vital base level of 42,000 can bring back selling interest and pull the index lower to 41,500 and then to 41,000.

Thereafter, a support at 40,000 will come to play. Investors with a long-term perspective can stay invested with an improved stop-loss at 37,000.

Nifty Bank (28,594.3)

In the past week, the Nifty Bank index continued to trend northwards, gaining 1,795 points, or 6.7 per cent.

It surpassed a key resistance at 27,000 conclusively, but was met with a resistance at 29,000 and experienced a minor correction.

The index is now range-bound between 28,000 and 29,000. A clear rally above 29,000 will underpin the short-term uptrend and take it higher to 30,000. The next hurdles are placed at 31,000 and then 32,000, which is a significant long-term resistance. In that case, traders with a short-term view can take fresh long positions on a strong rally above 29,000 with a fixed stop-loss.

Conversely, if the index plummets below 28,000,it can bring back selling pressure and pull the index lower to 27,500 and then to 27,000.

The key supports thereafter are at 26,500 and 26,000.

As long as the index trades above the vital base level of 26,000, the short-term uptrend that commenced from the September low of 20,404 will remain intact.

The supports below 26,000 are placed at 25,500 and 25,000.

Global cues

Following a strong rally last Monday, the Dow Jones Industrial Average index managed to stay above the vital base level of 29,000. For the week, the index jumped 1,256 points, or 4 per cent, to close at 29,479.

The index now tests a key resistance at 29,500. A conclusive rally above this resistance can push the index higher to 30,000.

An emphatic breakthrough of this barrier is needed to bring back bullish momentum and take the index northwards to 30,300 and then to 30,500.

Conversely, a decline below the immediate base level of 29,000 can witness selling interest and pull the index lower to 28,650. Significant supports below 28,650 are at 28,500 and then 28,360 levels.

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Published on November 15, 2020
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