Range trading likely to continue

It was another volatile week for the markets, although the trading band for the Sensex narrowed to 500-odd points as compared to 765 points in the preceding week. The index, after a high of 20,332, tumbled to a low of 19,823, and settled with a marginal gain of 41 points at 20,166.

Among index stocks — Sterlite slumped nearly six per cent to Rs 168. Wipro and HDFC tumbled around five per cent each. Jaiprakash Associates, Tata Steel, DLF and HDFC Bank were the other major losers. TCS zoomed over nine per cent to Rs 1,040. Reliance Industries, Cipla and Hero Honda were the other major gainers.

It seems the markets are likely to trade in a range with a negative bias, with the possibility of the Sensex testing key support levels around 19,500 and 18,970 in the medium term. During the same time, we could see a series of lower highs. Next week, the index is likely to face resistance around 20,370-20,500. On the downside, the index is likely to seek support around 19,960-19,840.

The NSE Nifty moved in a range of 160 points; the index touched a high of 6,127 and a low of 5,967, before settling almost flat at 6,066, up four points. The Nifty seems to be trapped in the 6,250-5,950 trading band. One needs to wait for a breakout from this trading band before taking a fresh view on the markets. Currently, the index is marginally below its short-term (20-days) moving average, which is at 6,095. The bias will remain positive above 6,095, with the possibility of the index flaring up to 6,223. However, persistent weakness below 6,095 could see the index drop back to the lower end of the bollinger band, which is at 5,960.

In case the index breaks below 5,960 on the closing basis, it could drop all the way to 5,820, which is the medium-term (50-day) trend line of the index.