Wkly Tech Analysis: Markets not yet bottomed out

After a disastrous 2011, the markets seemed to have started the year 2012 on a hopeful note. However, one needs to exercise caution at higher levels as the markets may have not bottomed out for now.

The Sensex ended the year 2011 with a heavy loss of 24.64 per cent at 15,455. The markets ended extremely closer to the lows of the year indicating impending weakness in the markets.

Going forward into 2012, we are unlikely to see the highs of 2011, or in other words, the Sensex is unlikely to revisit 20,000-mark unless something extraordinary happens in the market. The bias seems for a lower top and lower bottom pattern; hence we conclude that the markets may have not seen the bottom for now.

The markets will be looking forward to multiple triggers in the first quarter of this year. Primarily the Q4 results will roll out next week, followed by the regional elections and finally the Budget. All these events will be keenly watched by the market players. So, expect a volatile ride in the first quarter of this calendar year.

On the upside, the Sensex is likely to face its first major hurdle around 17,500, above which the up move can stretch to 18,200 to 18,900. In case of a downside, the Sensex may seek support around 13,350-12,700, below which the index runs the threat of breaking the 10,000-barrier.

According to the monthly Fibonacci time-wise correction, the Sensex is likely to bottom out around mid-2012, i.e. somewhere around June.

Back to the weekly charts, the Sensex has started the year with a gain of 2.6 per cent at 15,863. Next week, the index is likely to get good support around 15,615-15,450, and on the upside the index could face resistance around 16,100-16,265.

Similarly, the Nifty is likely to test 4,835 or move further higher to 4,880 in case of positives, while on the downside the index could seek support around 4,675-4,625 next week.

On the weekly charts, the Nifty has ended below its long-term WMA (Weekly Moving Average) for the fourth straight week. A breakout above the same would see the index spurt to its next major hurdle around the 4,940-level.

The monthly charts for the Nifty indicate that the bears are likely to have the upper hand as long as the index trades below 4,820. A close below 4,580 can accentuate the downside with potential downside risk up to 3,500-3,700 odd levels. On the upside, in case the index sustains above 4,820, it could rally up to 5,350-odd levels.