5,300 is the key index level

After slipping initially, the markets bounced back on the back of a rally in banking stocks. The Nifty nearly slipped to the 5,100 level mentioned last week, however, it rose smartly during the course of the week.

Technically, the market indicators are not giving a clear picture. While the moving averages, Directional index and Stochastic slow indicate bullishness on the daily charts. MACD remains in the sell mode. On the weekly charts, MACD is neutral. While the Directional index is positive, the Stochastic slow is in the negative zone.

Given such divergent signals, it could be prudent to stick to simple moving averages, which indicate a positive bias, though above 5,300 only. In the medium term, the Nifty may move in the range of 5,200-5,400 for the next couple weeks.

The Sensex, as expected, retracted 38 per cent of the previous upmove and found support around the 17,300 level. The index touched a low of 17,276 on Monday and recovered to close the week at 17,694, up 103 points.

Banking major SBI was the top gainer among the index stocks. The stock soared over 10 per cent to Rs 2,256. Tata Motors, Jaiprakash Associates, ICICI Bank and Hindustan Unilever rallied 6-8 per cent each. On the other hand, Tata Steel, Sun Pharma, Sterlite, TCS and Wipro shed 4-7 per cent each.

As long as the Sensex stays above 17,500, the index can target 18,050-18,350 in the coming days.

Next week, expect the Sensex to seek support around 17,500-17,385, while the index may face resistance around 17,805-18,005.