Indices seem to be over-bought

WEEKLY TECHNICAL ANALYSIS

The Reserve Bank of India in its annual policy statement left the key rates unchanged, and the finance minister extended the tax holidays for IT companies by a year to March 31, 2009.

The major indices closed above their respective 200-DMA (daily moving average). The Sensex gained 474 points to end at 17,600. Jaiprakash Associates zoomed nearly 17 per cent to Rs 287. Reliance Energy, Satyam, Mahindra & Mahindra, Tata Motors, DLF and Wipro gained 8-12 per cent each. Grasim, however, was the major loser, down nearly 11 per cent at Rs 2,649.

The Sensex has gained 14.7 per cent (2,257 points) in the last four straight weeks.

The Sensex may test 18,100-18,150 levels in the current upmove. The index is likely to face resistance around 17,845-17,920-18,000 this week, while the support on the downside could be around 17,355-17,275-17,200.

The Nifty, too, has closed strongly above its 200-DMA (5,164) at 5,228 - up 117 points. It has gained 12.5 per cent (581 points) in the last four weeks.

While the index has shown strength in the recent upmove, it is now in an overbought zone and the chances of profit-booking are high.

The 9-days RSI (relative strength index) is around 73 per cent and the Stochastic Slow is again showing negative divergence, i.e. %D is above the %K line. The mid-term (50-DMA) and short-term (20-DMA) are also converging around the 4,930 levels.

The Nifty may target 5,460 level in the short-term. It may face resistance around 5,310-5,340-5,365 and support around 5,145-5,120-5,090 this week.