Short-term trend to turn bullish

The markets, after a sluggish start to the week, exhibited high drama in the latter half, as the benchmark indices kissed their respective long-term Daily Moving Averages (200-DMA), before paring gains.

The Sensex, from a low of 18,683, rallied to its 200-DMA at 19,131 - up 449 points for the week on Friday. It eventually settled at 18,858, up 95 points. Thus, the index has gained for the third straight week - up 5.5 per cent (988 points) in the same period.

Among the index stocks, this week, Reliance Infrastructure and DLF surged 7.5 per cent each to Rs 583 and Rs 237, respectively. Tata Motors, Maruti, Bharti Airtel and Mahindra & Mahindra were the other major gainers. On the other hand, Sterlite, down almost four per cent at Rs 163, was the top loser. BHEL, ICICI Bank, Jaiprakash Associates and Jindal Steel were the other prominent losers.

The short-term (20-DMA) of the Sensex is currently at 18,320, while the medium-term (50-DMA) is at 18,342. The short-term trend will turn positive when the 20-DMA crosses the 50-DMA. Given the closeness, this is likely to happen soon. Hence, thereafter, the markets would be in a clear buy on dips trend.

The monthly Fibonacci chart is yet to get any signal. The buy call will be initiated when the Sensex crosses 19,181. On the downside, the index is likely to get considerable support around 18,500-18,250.

The NSE Nifty moved in a range of 130 points, from a low of 5,611, it jumped to a high of 5,740 (200-DMA), and then ended with a gain of 33 points at 5,661.

The daily Moving Average Convergence-Divergence (MACD) and the weekly MACD are both above the signal line, indicating bullishness. However, the Stochastic Slow indicates sell on the daily charts, and buy on the weekly charts. Given the slightly overbought conditions, and a resistance around the 200-DMA, we could see some profit-taking before the upmove resumes.

The key support for Nifty exists around 5,550-5,500, below which the index could dip to 5,460-odd levels.