Sensex looks overbought

WEEKLY TECHNICAL ANALYSIS

Sustained buying support in select index heavyweights helped the Sensex cross the 10,000-mark last week. The index moved in a much narrower range of 555-odd points last week from a low of 9,633 to a high of 10,189. The Sensex finally ended with a gain of 410 points at 10,100 on Friday.

Among the index stocks, Tata Motors, ICICI Bank, Grasim, HDFC Bank, DLF, Hindustan Unilever, NTPC, ONGC and Mahindra & Mahindra gained 10-16 per cent each. On the other hand, Satyam slumped 26 per cent to Rs 163. Reliance Communications dropped 13 per cent to Rs 249 and HDFC shed 7 per cent at Rs 1,636.

With the index crossing its first major hurdle on the monthly charts, the Sensex is now likely to move up to 10,700 in coming days. However, as the index has reached an overbought zone, some amount of profit-taking cannot be ruled out. The 14-day RSI (Relative Strength Index) is almost 72 per cent. An RSI of above 70 per cent is said to be overbought.
 

KEY LEVELS
	Sensex	Nifty
S3	9755	2965
S2	9820	2985
S1	9890	3005
Close	10100	3078
R1	10310	3150
R2	10375	3170
R3	10445	3190
S-Support level R-Resistance level

On the upside, the index is likely to face resistance around 10,310-10,380-10,445, while on the downside, the index is likely to find support around 9,750-9,670.

The NSE Nifty, too, moved in an extremely narrow range of 184-odd points from a low of 2,923 to a high of 3,107. The Nifty finally ended with a gain of 156 points at 3,078. The index appreciated more than 1 per cent last week compared with the Sensex. While the Sensex was up 4.23 per cent, the Nifty gained 5.35 per cent. Hence, the Nifty was able to scale past the 3,040-level, while the Sensex ended at 10,100.

In doing so, the Nifty has also managed to close above its mid-term (50 days) moving average after 62 trading days. The mid-term moving average is now at 2,953 and the short-term (20 days) moving average is at 2,815. The short-term moving average has to cross the mid-term moving average for the uptrend to sustain.

This week, the Nifty is likely to find support around 3,005-2,985-2,965, while resistance on the upside would be around 3,148-3,170-3,190.