Index Outlook. Indices can edge higher

The upcoming week could be critical for the domestic market as the March derivative expiry nears. Negative global cues can keep the broader indices volatile in the near term.

The crude oil price now tests a key support at $48 per barrel and is showing signs of upward reversal from this level. Resistances to note are at $48.8 and $50. Vital supports below $48 are at $47 and $46.

Following an initial three days of decline, the Nifty 50 index recouped some of its earlier loss in the subsequent two trading sessions. However, it ended the week on a negative note. The index fell 52 points or 0.57 per cent last week.

This week: The index is witnessing a corrective decline after a sharp rally last week. Short-term trend is up. This uptrend will remain in place as long as the index trades above the key immediate support band between 8,950 and 9,000. Ongoing correction has led to the index giving up half of its previous week’s gains. If the index plunges below 8,950, it will signal the reversal of the short-term trend.

Subsequent key supports to watch are at 8,860 and 8,800 levels. Strong rally above the immediate resistance level of 9,200 can take the index higher to 9,286 and 9,353 levels. Traders with a short-term view should tread with caution and buy on dips as long as the index trades above the support band between 8,950 and 9,000.

Medium-term trend: The medium-term continues to be up for the index. It has been on a medium-term uptrend since last December low of around 7,900. The uptrend will strengthen further if the index manages to stay above the key support range of 8,950 and 9,000. In such a scenario, the index can resume its medium-term uptrend and trend higher to 9,353 levels.

Having said that, even if the index plunges below 8,950 in the near future, investors with a medium-term perspective need not hit the panic button. As long as the index trades above the key level of 8,500, the medium-term uptrend will remain intact and the index may even resume its uptrend.

Strong rally above 9,353 can take the index higher to 9,500 in the medium term. Next supports below 8,500 are at 8,350 and 8,250.

Though the Sensex breached the key resistance level of 29,000 recently after two weeks of testing, it is now faced with a key hurdle at 29,500. The index can test this barrier and experience a corrective decline in the near term. As long as the index trades above the immediate support level of 29,000 the near-term bullish momentum will continue.

But a decisive slump below 29,000 can be a threat to the near-term uptrend and pull the index down to 28,740 and 28,500 levels, which is a key long-term support level. Subsequent long-term support to note is placed at 27,500; only a plunge below this level will mar the medium-term uptrend in the index that has been in place since December. Next support is at 27,000.

Conclusive break above 29,500 can bring back bullish momentum and strengthen the medium-term uptrend that can take the index higher to 30,000 and then to 30,500 in the ensuing months.

Last week, the index dipped below the immediate support level of 21,000 before reversing higher. It was a volatile week for the index and it almost tested the key support level of 20,700 by recording an intra-week low of 20,753. The near-term bullish momentum will remain intact if the index manages to stay above the key support level of 20,700 again.

Strong rally beyond 21,250 can take the index higher to 21,500 in the short term. Traders with a short-term perspective can hold their long positions with a stop-loss at 20,900 levels. Conversely, if the index tumbles below the key base level of 20,700, it may result in selling pressure that may drag the index lower to 20,500. Next key supports are at 20,370, 20,150 and 20,000.

The Bank Nifty has been on a medium-term uptrend since December low of 17,606. This uptrend will stay intact as long as the index trades above 19,000 levels.

The Dow Jones Industrial Average has been on a near-term correction since recording the high of 21,169 in early March. Last week, the index fell 1.5 per cent to close at 20,596, breaching a key support at 20,800.

Now the index trades above the base level of 20,500. Slump below this base can pull it down to the strong support level of 20,000 in the short to medium term. Key resistances are at 20,800 and 21,000.

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