Bulls set to face test of strength next week

The markets exhibited range-bound movement during the week, albeit with a positive bias. The Sensex, as expected, faced resistance as it neared the 17,920-level, whereas on the downside it found considerable support around 17,580. The week’s range was just 310 points.

Given the positive bias, thanks to heavy buying by foreign institutional investors (FIIs), the Sensex ended higher for the sixth straight week. The BSE benchmark index was up 0.8 per cent for the week. Over the last six weeks, it has soared 13.3 per cent.

Among the Sensex stocks, Jindal Steel and Bajaj Auto were major gainers this week, up around eight per cent each. TCS, Wipro, Sterlite, Tata Motors and SBI were other big gainers - up 3-5 per cent each. On the other hand, Bharti Airtel slumped 10 per cent to Rs 350. Hindustan Unilever, Mahindra & Mahindra and Sun Pharma were other notable losers.

As per the monthly Fibonacci charts, the Sensex seems to be facing some resistance around its first major hurdle at 17,920. However, given the positive bias, the index may make an attempt to clear this hurdle next week. In that case, the next major hurdle would be around 18,200.

However, in case the Sensex is not able to cross 17,920, and breaks below 17,560, then it could be somewhat worrying for the bulls. A break of 17,560 could trigger an intermediate correction to at least 16,800-odd levels.

The NSE Nifty moved in a very narrow range of 100-odd points (105 to be precise). The index touched a low of 5,323 and a high of 5,428. Only once during the week, the index was able to give a close above 5,400, despite crossing it thrice during the week. However, on the positive side, the index consistently found support around 5,325, which is now the higher base and a trend reversal point for the index.

On the upside, the Nifty needs to break past 5,440 for a rally up to 5,600-odd levels. Monday could be a crucial trading day for the index, as that could set the trend for the rest of the week.

The momentum oscillators on the daily charts look a bit tired, but have not given a sell signal. On the weekly charts, though, the oscillators continue to favour the bulls. Hence, the early part of the week is crucial.

Next week, the Nifty may face resistance around 5,420-5,445, while it may seek support around 5,340-5,315.