More downside likely

The markets tumbled sharply the last trading day of the week, wiping out the entire week's gains. The Sensex, which had gained over three per cent in the first three trading days of the holiday-shortened week and touched a high of 19,393, tumbled back sharply on Friday to a low of 18,560. The Sensex finally ended the week with a loss of 1.2 per cent (229 points) at 18,789, thanks to the huge 769 points fall on Friday.

BHEL was the major loser for the second straight week. The stock declined another 10 per cent to Rs 106. Tata Power, State Bank of India, Reliance and Maruti Suzuki plunged over four-six per cent each. Coal India, Tata Consultancy Services, HDFC Bank and Larsen & Toubro were the other major losers. On the other hand, Tata Motors zoomed over 12 per cent to Rs 313. Tata Steel, Hero MotoCorp and Sun Pharma surged around seven per cent each. Bajaj Auto, Jindal Steel, Wipro and Hindalco were the other prominent gainers.

According to the monthly Fibonacci charts, the Sensex has given a 'sell' signal. Hence, the overall bias is likely to remain bearish as long as the Sensex sustains below 18,900-odd levels.

On the downside, the index has near support around 18,500-odd levels. This particular level is of significance on the quarterly and yearly charts. Hence, one should watch this level closely. In case, the BSE index fails to sustain above 18,500, we could witness fresh fall in the markets.

The next significant support levels for the Sensex are around 18,245-17,970 and 17,800-odd levels. According to the weekly Fibonacci charts, next week the Sensex is likely to seek support around 18,280-18,080, while on the upside, face resistance around 18,915-19,115.

The NSE Nifty rallied to a high of 5,755, following which it nose-dived to a low of 5,496 - down 259 points from the week's high. The Nifty finally settled with a loss of 58 points at 5,508.

The short-term trend on the daily charts is negative, as the 20-day moving average (DMA) has slipped below the 50-DMA. However, key momentum oscillators are showing confusing signals. The MACD (moving average convergence divergence) and the ADI (average directional index) favour the bears, while the 14-day RSI (relative strength index) and the Stochastic Slow are slightly in favour of the bulls.

According to the weekly charts, the Nifty is likely to test its 200-WMA (weekly moving average) soon, which is at 5,440. Also key momentum oscillators are clearly in favour of the bears on the weekly and the monthly charts. Hence, the possibility of more downside looks higher.

The monthly charts indicate that the Nifty may fall below 5,400-odd levels in the near term, and may slide all the way to near about 5,100-odd levels in the short-to-medium term.

To sum it up - Sensex likely to trade with a negative bias as long as the BSE index sustains below 18,900-odd levels. Fresh weakness can be expected on break of 18,500. The Nifty may test 200-WMA at 5,440 soon. The index may even slip below 5,400, and slide to near about 5,100-odd levels in the short-to-medium term.