Weekly charts hint at weakness ahead

Resurgence of global worries, European sovereign debt crisis, China rate increase fears and political turmoil in India following the 2G scam saw the markets take a southbound journey.

The Sensex began the week on a positive note. However, the bears ruled the roost for the rest of the week. The index touched a high of 20,380 and tumbled to a low of 19,505 — down 875 points from the week’s high. The BSE benchmark index finally settled with a loss of three per cent (572 points) at 19,585.

According to fibonacci calculations on quarterly and yearly basis, the Sensex is likely to get considerable support in the 19,440-19,550 trading band, below which the index could slide all the way to sub-19,000 levels.

The NSE Nifty touched a high of 6144, and then dropped to a low of 5,864 — down 280 points from the week’s high. The index finally settled with a loss of 181 points at 5,890.

Momentum indicators on daily charts have entered oversold zones. However, one needs to watch out for 5,880 as a crucial level. The bears will have the upper hand as long as the index stays below 5,880.

On the upside, the index may face resistance around 6,070 and 6,130, which are a short-term and medium-term moving averages for the index, respectively.

On the other hand, weekly charts are indicating fresh weakness with a possibility of the Nifty slipping to 5,750. The main worries are the Stochastic Slow and ADX - Average Directional Index - which have turned negative on the weekly charts.