Index rise capped around 16,600

The markets broke a three-week downtrend this week, as major indices found support around the long-term (200-day) daily moving average (DMA). The daily indicators have turned somewhat positive. However, the medium-term picture looks bleak. Any recovery from the current levels could be short-lived.

The Sensex touched a low of 15,652, which is also its 200-day DMA. A break of the long-term support is certainly going to ring alarm bells, as it opens the possibility of the index tumbling to sub-13,000-levels.

As mentioned in our daily technical analysis as well, the current trend will remain weak as long as the index stays below 16,600. So, watch out for resistance around these levels.

The Sensex ended the week with a gain of 237 points at 16,153, reversing its three-week downtrend, wherein the index had shed 1,639 points. Among the 30 index stocks, Hero Honda soared nearly 7 per cent to Rs 1,690. Grasim, Bharti Airtel, Infosys, Jaiprakash Associates, ICICI Bank and Reliance Communications moved up 3-5 per cent each. While, Tata Steel shed 4.5 per cent to Rs 534. Tata Power, DLF and Hindalco declined 2-3 per cent each.

Next week, the index is likely to face resistance around 16,360-16,430-16,495, while it may find support around 15,940-15,880-15,810.

The Nifty moved in a range of 259 points, touched a low of 4,692 and then recovered to a high of 4,951. The index settled with a gain of 70 points at 4,827.

The Nifty long-term moving average is at 4,685, the medium-term (50-day) moving average is at 5,064, and the short-term (20-day) moving average is at 4,942.

The corresponding crucial resistance for the Nifty is at 4,940. Next week, the index is likely to face resistance around 4,890-4,910-4,930 and may get support around 4,790-4,740-4,720.