Wkly Tech Analysis: Bias clearly in favour of bulls

The markets logged sharp gains this week aided by a temporary relief to the European debt crisis after the global Central banks decided to make dollar loans cheaper. Markets worldwide rallied, and our own benchmark indices - the Sensex and the Nifty - surged over seven per cent each.

The Sensex arrested its four-week losing streak with a strong 7.2 per cent (1,151 points) surge to 16,847. Among the index stocks, Hindalco zoomed over 19 per cent to Rs 135. Tata Steel, SBI, Tata Motors, Jaiprakash Associates and TCS soared over 10 per cent each.

The markets staged a smart recovery after four straight weeks of losses, wherein the Sensex touched a fresh calendar year low of 15,479. The recovery has been so swift that the index is already up nearly nine per cent from it's calendar-year low.

According to the Fibonacci retracement theory, the Sensex has retraced more than 50 per cent of its recent fall. The next hurdle could be around 17,000-odd levels which is the 61.8 per cent retracement of the fall from its recent high of 17,908 to a low of 15,479.

The bias seems to be fairly positive as the gap-up opening on Wednesday was above the 30 per cent retracement level around 16,412. So, as long as the index is able to sustain above 16,400, the bulls are likely to have the upper hand.

Also the monthly and quarterly charts, indicates a target of around 17,200 for the Sensex in the short-term. If the index starts building base above the 17,000-mark, then probability of a 100 per cent retracement to 17,900-odd levels could be very much on cards.

The NSE Nifty moved in a range of 308 points, from a low of 4,755 the index surged to a high of 5,063. Although the medium-term trend indicates bearishness on the daily charts, on the positive front the index has managed to close above its short-term and medium-term moving average.

As long as the index is able to sustain above 4,980 or slightly lower above 4,900, one can adopt the strategy of buy on dips. The reason for the same is that the MACD (Moving Average Convergence/ Divergence) is just turned positive on the daily charts, and the Stochastic Slow also indicates that further gains are likely.

As a word of caution, in case the next weekly close is not above 5,070 then we could be in a spot of bother going ahead, or else we could be in for more gains towards the end of the year.