Technical Analysis

Index Outlook: Indices to remain volatile

Yoganand D | Updated on June 22, 2019 Published on June 22, 2019

The Sensex and the Nifty continue to face resistance. Investors should be cautious

The key bellwether indices — the Sensex and the Nifty — continued to experience selling pressure at higher levels and retreated in the later part of the week. In the ensuing week, the weakening rupee, progress of the monsoon and the June month derivatives expire are key factors to note. Globally, the Fed kept rates unchanged, opening the door for a rate cut in the future and lifting global markets. But continued trade war concerns and a slowing global economy can keep global markets choppy.

Nifty 50 (11,724.1)

The Nifty index continued to remain volatile and slumped 99 points or 0.84 per cent last week. It tests a key support in the 11,700-11,750 band with a negative bias.

The index recorded an intra-week high at 11,844 and failed to surpass a key immediate resistance at 11,850 levels. Subsequently, it began to decline. A strong break of 11,850 can encounter next resistance in the 12,000-12,040 range.

A further break out of this barrier will pave the way for an up-move to 12,200 and 12,500 over the short to medium term. However, inability to move beyond 11,850 will keep the bias negative. In that case, the index can continue to trend downwards. A strong tumble under 11,700 can drag the index down to the subsequent key support at 11,600. This will deteriorate the short-term uptrend and indicate the possibility of a trend reversal.

We restate that a conclusive plunge below the significant support level of 11,600 can pull the index down to 11,500 or 11,400 levels in the short term.

A further slump below 11,400 will mitigate the short-term uptrend that has been in place since February.

The index can trend downwards to the key supports at 11,250 and 11,150 levels thereafter. Investors with a medium-term horizon can stay invested with a stop-loss at 11,350 levels.

 

 

Medium-term trend: As long as the index trades above the major support in the 11,000-11,100 zone, the medium-term uptrend will stay intact. A strong rally above 12,000 can push the index up to 12,500 in the medium term.

Conversely, a fall below the 11,000-mark will mar the medium-term uptrend and pull it lower to the subsequent vital support level of 10,800 and 10,600 in the medium term. Meanwhile, the immediate supports to note are pegged at 11,700 and 11,500.

Sensex (39,194.4)

The Sensex witnessed another week of volatility and ended in the negative territory, declining 257 points or 0.65 per cent. The level of 39,600 limited the upside last week. An emphatic decline below the near-term support at 39,000 can drag the index down to 38,600 and 38,000 levels in the coming trading sessions.

Only a strong fall below 38,000 will be a threat to the short-term uptrend that has been in place since early May. Such a fall can pull the index lower to 37,500 and 37,000.

On the upside, a strong rally above the key immediate resistance level of 40,000 is required to reinforce the bullish momentum and push the index higher to 40,400 and 40,800 levels in the medium term. We reaffirm that a sideways consolidation in the wide 38,000-40,000 band is possible if the index struggles to move beyond the 40,000-mark.

Nifty Bank (30,628.3)

Last week, the Nifty Bank index was choppy and slipped marginally. The index closed almost flat forming a doji candlestick pattern in the weekly chart, depicting neutral stance. It now tests a key support at 30,500. If the index fails to move beyond 31,000, the near-term stance will remain bearish and indicate the possibility of breaking below 30,500. Such a downward break can drag the index lower to 30,250 and 30,000 in the short term.

Traders with a short-term view can consider initiating fresh short positions if the index fails to move above 31,000 levels, with a fixed stop-loss. A further decline below 29,500 levels can weaken the short-term uptrend. Thereafter, the index can continue to move downwards to 29,000 in the ensuing weeks.

Conversely, the index needs to conclusively break above 31,000 to bring back bullish momentum and take it higher to 31,500. A further up-move beyond this level can push the index upwards to 31,700 and 32,000 over the short to medium term.

Global cues

In the previous week, the Dow Jones Industrial Average resumed its uptrend and gained 629 points or 2.4 per cent to close at 26,719. However, the index faces a significant resistance ahead at 27,000-mark.

A conclusive break-out of this hurdle will strengthen the uptrend and take the index up to 27,500 and 28,000 over the medium term. But a downward reversal from 27,000 can drag the index down to 26,500. A plunge below this base level can pull the index lower to 26,200 and 26,000 levels. Next supports are at 25,500 and 25,000.

The Nikkei 225 index advanced 141 points or 0.67 per cent last week in the midst of choppiness and ended at 21,258.6. It managed to test resistance at 21,500. A strong break above this level is needed to take the index higher to 22,000 and 22,300 in the ensuing weeks. Supports to note are at 21,000 and 20,500.

Published on June 22, 2019

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.