Wkly Tech Analysis: Key support for Nifty at 5,350

The markets exhibited range-bound movement for most part of the week as they came to terms with continued unrest in West Asia and high crude oil prices. Further, the massive earthquake on Friday jolted the sentiment to an extent. The Sensex recovered from a low of 18,059 and touched a high of 18,583 — up 525 points from the early week’s low. However, the markets slipped back towards the end of the week and the Sensex eventually ended with a loss of 312 points at 18,174.

Among the index stocks, Tata Steel shed nearly 6 per cent at Rs 582. BHEL, TCS and SBI dropped around 5 per cent each to Rs 1,975, Rs 1,076 and Rs 2,572, respectively. Maruti, Larsen & Toubro, Jindal Steel and Sterlite were the other major losers. On the other hand, ONGC surged nearly 5 per cent to Rs 281. Reliance Communications, Wipro, DLF and Reliance Industries were the other major gainers.

The broader trend continues to look positive for the markets, however, there could be a marginal dip of 300-odd points on the Sensex before we resume the up move. The BSE benchmark index has considerable support around 17,850, and as long as the index holds above this on a closing basis one can say the trend is up in the short term. On the upside, the index will gain momentum above 18,350. Going ahead, the advance numbers and RBI policy action are likely to set the tone for the markets.

The NSE Nifty moved in a range of 155 points, and finally settled with a loss of 93 points at 5,445. The Nifty has strong support around 5,350, which might be tested during the early part of the week. As long as 5,350 does not break, one can look forward to a pullback up to 5,700-odd levels on the index. So far, 5,570 has been a major hurdle for the markets.

The Nifty at 5,445 has closed marginally below its short-term (20-days) moving average. A trend line support of the recent lows — 5,178 on February 11 and 5,232 on February 25 — draws support around 5,350. Hence, 5,350 becomes an important support on the downside. Among the momentum indicators, the MACD is in buy mode on the daily charts. However, the Average Directional Index (ADX) and the Slow Stochastic are favouring the bears.

On the weekly charts, the MACD and ADX are in sell mode. While on the other hand, the Slow Stochastic is positive, and the RSI too is making higher highs and higher lows which is again a positive sign. Given such conflicting signals, we could very well see two-way movement. The ideal scenario could be a weak start to the week followed by a recovery in the second half.