Friday's low crucial for Sensex

The markets retraced sharply, after facing resistance around the higher end of the Bollinger Band on the weekly charts. The Sensex touched a high of 20,351 but soon reversed direction and tumbled to a low of 19,700. The index finally ended the week at 19,748, a loss of 401 points.

Among the Sensex 30 stocks, Larsen & Toubro slumped about 13 per cent to Rs 846. Jindal Steel, Tata Steel, Hindalco, BHEL and Sterlite plunged 8-10 per cent each. Hero MotoCorp rallied about five per cent to Rs 1,865. Sun Pharma, Bajaj Auto, Infosys and Bharti Airtel were the other major gainers.

According to the monthly Fibonacci charts, the Sensex, after giving a 'buy' signal, fell below key support levels. Friday's low of 19,700 offers major hope to the markets. In case the BSE index is able to sustain above 19,700, we could witness a pull-back rally. On the flip side, in case it is unable to do so, we could witness a re-test of 19,400-odd levels.

According to the weekly Fibonacci charts, the Sensex is likely to move in a broad range of 19,345-20,150 next week. In the interim, it might seek support at 19,500-19,425 and face resistance at 19,995-20,150.

The National Stock Exchange Nifty swung in a broad range of 224 points. From a high of 6,093, the index slumped to a low of 5,870, settling at 5,886, a loss of 143 points. In the process, it derailed its four-week rally, wherein it had surged 6.4 per cent (362 points).

On the daily charts, key momentum oscillators such as the moving average convergence-divergence, 14-day relative strength index and the Stochastic Slow have turned negative. Therefore, the markets might witness downward pressure in the near term.

The price-to-moving averages trend also favours the bears, as the index closed below the 20-day moving average (DMA) and the 50-DMA, at 5,930 and 5,900, respectively. However, the weekly charts indicate the Nifty has multiple support levels in the near range. The index might seek support around the 20-weekly moving average (WMA), which also coincides with the 200-DMA at 5,850-odd levels and at 5,795, the 50-WMA.

Failure to sustain above 5,850-odd levels is likely to trigger a deeper correction to 5,750-odd levels in the near term. On the upside, the index has to sustain above 5,900 for it to gain strength. The weekly and the monthly Stochastic Slow are in favour of the bulls.

To sum up, Friday's low of 19,700 is the key trigger point for the Sensex. The NSE Nifty has multiple support levels at 5,850-5,800-5,750. Momentum on the daily oscillators is in favour of the bears, while select momentum oscillators on the weekly and monthly charts favour the bulls. Therefore, the downside might be limited.