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Wkly Tech Analysis: Counter rally on the cards?

Among the index stocks, TCS was the standout gainer, up over 10% at Rs 1,205

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Barring Monday, when the shed over 1.5 per cent, the markets more or less moved in a narrow band during the rest of the week. The Sensex, from a high of 17,444, slipped to a low of 17,019, and finally ended the week with a loss of 187 points at 17,187.

Among the index stocks, was the standout gainer, up over 10 per cent at Rs 1,205. Reliance, and were up around a per cent each. On the other hand, Gail India plunged over eight per cent to Rs 361. DLF, BHEL, Bajaj Auto, Larsen & Toubro, SBI and Bharti Airtel were the other major losers.

According to the weekly Fibonacci charts, the Sensex is likely to seek support around 17,025-16,925; a break below 16,925 may result into heavy selling pressure. On the upside, the index is likely to face resistance around 17,350-17,450. The moved in a range of 155-odd points; the index touched a high of 5,311 and a low 5,154, ending the week with a loss of 82 points at 5,209.

The Nifty, for the third straight week, took support around the 50-week moving average, which is at 5,184. The short-term (20-week moving average) at 5,159 is also converging on the medium-term moving, and a crossover of the same will be a positive sign for the markets.

However, there are more than one conflicting signals from the momentum oscillators, making it difficult to predict the direction of the markets in the near term.

First, continuous support around the 5,180-odd levels, a key support area both on the daily and weekly charts, and the likely cross of the moving averages on the weekly charts hint towards a likely counter rally by the bulls. Positive overseas cues and strong earnings by corporates can support the cause.

However, on the flip side, the weekly Stochastic Slow is strongly in favour of the bears, and the weekly is also more or less on the verge of turning bearish.

Given these conflicting signals, a counter rally, if any, could be difficult to sustain in the near term. Next week, the index is likely to face resistance around 5,270 and 5,305, while seeking support around 5,150 and 5,110. The overall bias is likely to favour bears as long as the Nifty trades below 5,380.

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