Sensex likely to seek support at about 18,500

This week, the markets exhibited choppy movement within a narrow trading band. The Sensex moved in a range of 265-odd points, with the index touching a high of 18,801 and a low of 18,535. It ended the week almost flat, at 18,682, a rise of seven points.

Among Sensex stocks, ITC soared about five per cent to Rs 298, while Hero MotoCorp rallied about four per cent to Rs 1,849. Tata Power, Bharti Airtel and HDFC were the other major gainers. Gail India tumbled about five per cent to Rs 360, while Mahindra & Mahindra fell nearly four per cent to Rs 823. Tata Steel, Sun Pharma, Jindal Steel, Hindalco and Sterlite were the other major losers.

According to the monthly Fibonacci chart, the Sensex gave a marginally positive signal at the beginning of the month. Therefore, one should watch the 18,500-level very closely. As long as the index sustains at above 18,500, a sharp rally to a fresh monthly high of 19,130-odd levels can't be ruled out. On the flip side, in case the Sensex slips below 18,500, we could see a further downside to 18,400-18,150 levels.

Next week, the Sensex is likely to seek support at 18,580-18,520, while it might face resistance at 18,785-18,850.

This week, the NSE Nifty swung in a range of 90-odd points. From a low of 5,636, the index rose to a high of 5,723, finally settling eight points higher at 5,684. Momentum oscillators for the index are in a conflicting mode.

While the price-to-moving average continues to remain positive daily, on a weekly and monthly basis, other key indicators are displaying divergent trends. Hence, markets are witnessing choppy movement.

According to the daily charts, the moving average convergence-divergence (MACD) is in a sell mode, while the Stochastic Slow and the 14-day Relative Strength Index have shown positive divergences. On the weekly charts, the MACD and the RSI are in a buy zone, while the Stochastic Slow has shown a negative divergence. The monthly chart, however, remains the best bet, with all key oscillators in favour of the bulls.

Therefore, we might see some volatility and any dip should be seen as an opportunity to enter the markets. The daily trading band indicates a swing between 5,620 and 5,760. The weekly charts indicate considerable support at 5,535-odd levels. On the upside, the index is likely to scale 5,950 in the coming weeks.

Next week, the Nifty might seek support at 5,650-5,630, while it might face resistance at 5,720-5,740.