Wkly Tech Analysis: Markets likely to consolidate soon

The Sensex ended higher for the second straight week and is now up 4.5 per cent so far this year at 16,155. This week, the index scaled to a high of 16,257, while it touched a low of 15,678 early in the week.

Among the index stocks, Tata Steel surged nearly 15 per cent to Rs 416. Hindalco, DLF, Sterlite Industries, Larsen & Toubro, Jindal Steel and Coal India rallied 7-13 per cent each. On the other hand, Infosys and TCS were the major losers down almost nine per cent and 7.5 per cent. New entrant Gail India shed 2.5 per cent.

The index seems to have given a buy signal on the monthly charts. The bias is likely to remain bullish as long as the index remains above 15,865. On the upside, the index could target 16,390 or a further high at 16,600.

The Nifty, after three weeks of consolidation, gave a breakout on the upside by closing above its long-term weekly moving average. In the process, the index also ended higher for the second straight week, up 2.5 per cent at 4,866.

The drawback of the current up move is that it has come on lower participation; hence it seems to be lacking strength according to the ADX Index (Average Directional Index).

Further select momentum oscillators are indicating conflicting signals on the daily and weekly charts. While the MACD and the Stochastic Slow are indicating a positive trend on the daily charts, the same are still in bearish mode as per the weekly charts.

Overall we could be in a some consolidation after two weeks of back-to-back gains. The previous hurdle of 4,765 for the Nifty, now became its major support. On the upside the index is likely to test its weekly short-term moving average at 4,950.

Next week, the Nifty is likely to face resistance around 4,945-4,990, while seek support on the downside around 4,790-4,740.