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After a turbulent week, the Sensex and the Nifty ended on a mixed note. The key benchmark indices are heading towards another rocky patch in the truncated week ahead. Therefore, investors should continue to tread with caution.
On the domestic front, the April auto sales numbers, earnings announcement for the fourth quarter and rupee movement need a close watch in the coming week.
Nifty 50 (11,754.6)
Following an initial slump, the Nifty index bounced back smartly, backed by short-covering and buying interest to end the week almost on a flat note. The volatility is likely to be continued in the truncated week as well. After the recent recovery, the index is once again testing a key resistance in the 11,700-11,750 band.
As mentioned last week in this column, a clear break-out from this resistance is needed to strengthen the bullish momentum and take the index northwards to 11,850 and 11,900 in the coming trading sessions. A further rally above 11,900 will bring the index to the resistance at 12,000, which is a psychological level. The index trades well above the 50- and 200-day moving averages.
The daily relative strength index is on the brink of re-entering the bullish zone from the neutral region, while the weekly RSI continues to feature in the bullish zone. Likewise, the daily price rate of change indicator has re-entered the positive terrain and the weekly counterpart hovers in the positive terrain.
Last week, the index took support at around the immediate base level of 11,600 and bounced up. This level can provide base, if any correction occurs in the near term. Next key support is at 11,500.
A convincing tumble below 11,500 can bring back selling pressure as well as profit-taking and drag the index further down. In that case, the index can decline to 11,400 and 11,300 over the short term. Subsequent support is in the 11,000-11,100 zone and the index can test this on a fall below 11,300 levels. We re-affirm that a strong fall below 11,000 is needed to mar the short-term uptrend and drag the index lower to 10,800 levels. Next supports are placed at 10,600 and 10,400 levels.
Medium-term trend: There is no major change in the medium-term trend, which is up. A strong break above the current resistance band of 11,700-11,750 will reinforce the primary uptrend and push the index up to 11,900 and 12,000 levels over the medium term. Conversely, if the index breaks below the key support at 10,600, it can trend downwards to 10,400 and 10,000 levels in the medium-term horizon.
Sensex (39,067.3)
The Sensex took support at 38,600 and bounced up last week. It ended the week in the negative territory, marginally declining by 72 points or 0.2 per cent. The index now tests resistance at 39,000. A strong rally above this level can take the index higher to 39,400 initially. A break-out of the level can extend the up-move to 39,800 and 40,000 over the short term. That said, the indicators and oscillators display mixed cues; hence, a cautious stance needs to be taken at this juncture. The hanging man candlestick pattern is in the weekly chart, which is a bearish reversal pattern.
A downward reversal once again can find supports at 38,800 and 38,600. But a strong fall below 38,600 can drag the index down to 38,200 and 37,800 in the short term. A strong downward break-out of the key support level of 37,800 can pull the index lower to 37,500 and 37,000. However, the short-term uptrend will stay in place as long as the index trades above the key base level of 36,500.
A strong plunge below this level can result in continuation of the down-move and the index can then test the supports at 36,400 and 36,200 levels. As long as the index hovers above 35,800, the medium-term up-trend will remain in place. Investors with a medium-term view can remain invested with a stop-loss at 36,400 levels.
Nifty Bank (30,013.4)
Amid volatility, the Nifty Bank index finished the week in the red, declining 209 points or 0.7 per cent last week. After an initial slump, the index found support at 29,500 and bounced up, but the recovery has failed to take the index conclusively above the resistance level of 30,000. The index now tests the key resistance at 30,000. A strong rally above this barrier will encounter resistance at 30,500 in the short term.
A breakthrough of the immediate resistance at 30,500 will reinforce bullish momentum and push the index higher to 31,000. Subsequent key resistances are at 31,500 and 32,000 levels. Traders with a short-term perspective should tread with caution as long as the index trades below 30,500. Can consider taking long positions on a strong rally above 30,500 levels with a fixed stop-loss.
On the downside, a decisive slump below the immediate key support level of 29,500 will strengthen the bearish momentum and drag the index lower to 29,280 and 29,000 levels in the short term. A further decline below the next key support level of 28,500 will weaken the short-term uptrend and drag the index down to 28,000 and 27,500.
Global cues
The Dow Jones Industrial Average was choppy last week and closed on a flat note at 26,543. The index tests a key resistance at 26,500. A strong breakthrough of this barrier will take the index higher to 26,750 in the coming weeks. Next resistance is pegged at 27,000. On the other hand, a decisive fall below the immediate support at 26,240 can pull the index down to 26,000 and then to ₹25,750. Subsequent key short-term support is at 26,000 for the index
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