Conflicting signals on charts

The markets moved in an extremely thin band of around two-odd per cent. The Sensex touched a low of 19,711 and then scaled a high of 20,151 — up 440 points from the week’s low. The BSE benchmark finally settled with a gain of 209 points at 20,074.

Global cues remained negligible given the holiday season in the western countries. Among stocks, Hero Honda zoomed almost 15 per cent to Rs 1,929. Reliance Communication, Sterlite and Hindalco surged 7-10 per cent each. Jindal Steel, Mahindra & Mahindra and Wipro were the other prominent gainers. On the other hand, Tata Motors slipped over three per cent to Rs 1,306. ONGC and Reliance Infrastructure were the other major losers.

The markets have so far gained 15 per cent this year and hence are likely to end the year on a strong note. This week, the index may face resistance around 20,350 on the higher side and seek support around 19,800 on the downside.

The NSE Nifty moved in a range of 123 points. From a low of 5,900, it rallied to 6,024, and finally ended with a gain of 63 points at 6,012. The index has ended higher for the second straight week and added 154 points during the period.

The charts present a conflicting picture. While the daily short-term trend indicates sideways movement, the momentum oscillators are in favour of an upmove. The MACD is above the signal line, which is bullish, the nine-day RSI is rising and the Stochastic Slow is also trending upwards.

On the other hand, on the weekly charts, the moving averages are in favour of the bulls, as the index has constantly found support around its short-term moving average. However, the MACD is below the signal line and hence favours the bears. The Stochastic Slow also favours the bears.

Given the conflicting signals, it would be prudent to say that even though the markets may trend upwards in the very short-term on the back of positive signals on the daily charts, a 5-10 per cent correction in the medium term cannot be ruled out.