Should you sell on a rally or buy on dips? Here's what charts say

The market needs to see follow-up buying to break above crucial resistance levels

Domestic equity markets have been taking investors for a ride ever since the second wave of Covid-19 hit the country. India, on Thursday, reported a record single-day rise of 2,17,353 new coronavirus infections taking total tally to 14,291,917. This was the 10th straight day of reporting over one lakh virus cases.

At the bourses, benchmark indices have come off record highs as concerns over derailment of economic recovery weigh on market mood. From a record peak of 52,517 and 15,432, the S&P BSE Sensex and the Nifty50 indices have corrected 7 per cent and 5.5 per cent, respectively. The Nifty Bank index, meanwhile, has tumbled 15 per cent. 

Since March 1, when the virus cases began rising in the country, the frontline indices have stayed flat. While the Sensex has slipped 0.6 per cent till Thursday, the Nifty has gained 0.35 per cent at the bourses. The Nifty Bank, on the other hand, has plunged 8 per cent on concerns over potential pile-up of non-performing assets (NPAs).

Against this backdrop, how should you play the markets? Here's a chart check:  

S&P BSE SENSEX

Likely target: 51,500 - 52,200 (above 50,000 levels)

Upside potential: 3.00% - 4.40%

The index has shown a rebound around the 100-days moving average (DMA). This momentum, however, needs to see follow-up buying in coming days to regain strength. Once that happens, the index may conquer 50,000 levels. A breakout above this level may build a bullish sentiment in the index, taking it towards 51,500 to 52,200 levels, as per the daily chart. On the downside, if the crucial support of 47,500 gets broken, the resultant sell-off may aggravate the build-up of short positions. CLICK HERE FOR THE CHART

NIFTY50

Likely target: 15,350 - 15,550 (above 15,000 mark)

Upside potential: 2.33% - 3.67%

With a sharp recovery near the 100-DMA, currently placed at 14,316 levels, the index is heading towards the breakout mark of 15,000 levels. This move needs to add follow-up buying, which may result in a breakout of the Relative Strength Index (RSI) above 52 value. The strength and momentum above 15,000 level may push the index towards 15,350 to 15,550 levels, as per the daily chart. The overall support stays at 14,200 levels for the bullish bias. CLICK HERE FOR THE CHART

NIFTYBANK

Likely target: 34,000 - 34,500

Upside potential: 3.03% - 4.55%

After breaching the 100-DMA at 32,638 levels, the index has shown a sharp reversal in the recent sessions. This move needs to see follow-up buying to scale the resistance of 33,000 levels. Once that happens, the rally may open door towards 34,000 to 34,500 levels. The closing basis support stays at 31,200 levels, as per the daily chart. CLICK HERE FOR THE CHART