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Wkly Tech Analysis: Nifty may drop to 5,470

Tata Steel and ITC fell about five per cent each to Rs 370 and Rs 275, respectively

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The markets showed a low trend through the week, ending at a loss for the sixth consecutive trading session. This week, the BSE benchmark index touched a high of 18,751, before falling to low of 18,267. The Sensex finally settled at 18,309, a loss of 374 points, owing to global economic concerns.

Among Sensex stocks, Tata Motors tanked 5.5 per cent to Rs 265. Tata Steel and ITC fell about five per cent each to Rs 370 and Rs 275, respectively. Hero MotoCorp, Hindalco, Cipla, ICICI Bank, Wipro, and and Jindal Steel were the other major losers. Bharti Airtel soared about nine per cent to Rs 301. Coal India and HDFC Bank were the only other gainers.

Last week, this column had mentioned the Sensex had monthly support at 18,220-18,050 levels. Now, the index is very close to the support levels. Therefore, watch out for a pullback from the support zone. In case the Sensex breaks the 18,050 support level, it may slip to 17,900-odd levels.

The NSE Nifty moved in a range of 159 points. From a high of 5,719, it plunged to a low of 5,560, settling at 5,574, a loss of 112 points. The Nifty has given a fresh sell signal on the daily charts. It has not only closed below its short-term and medium-term moving averages, but also below the lower end of the Bollinger Band. As long as the index sustains below 5,585, it is likely to show weakness. On the upside, the index needs to break and sustain at above 5,625 for a meaningful pullback.

According to the weekly charts, the Nifty seems headed towards the short-term (20-week) weekly moving average, or about 5,470. The weekly relative strength index and the average directional index continue to remain in favour of the bears. The weekly moving average convergence/divergence, which is in favour of the bulls, is also on the verge of turning negative.

There are a lot of negative indicators. The saving grace is the daily relative strength index and the Stochastic Slow may soon hit the oversold zone. Next week, the Nifty may swing between a broad trading range of 200-odd points. It may seek support at about 5,475, with interim support expected at about 5,515. On the upside, the index may face resistance at 5,635-5,675.

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For a consecutive week, the Sensex managed support at the monthly Fibonacci support level of about 18,220. The recovery was fairly swift towards the ...

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