Wkly Tech Analysis: Nifty may slip to 5,100 level

The nine-week market rally finally came to a halt owing to profit-booking in financial and energy shares. The Sensex, which has surged nearly 13 per cent, or over 2,000 points, between February 5 and April 9, finally ended with a loss of 2 per cent at 17,591.

Profit-taking took place mainly on account of nervousness ahead of the RBI credit policy review early next week. The markets expect the central bank to raise rates given the rising inflation. However, the quantum of rise is the main concern.

The markets were edgy right from the start of the week, and slipped lower as the week progressed. Among the index stocks - Hero Honda was the major loser - down nearly 7 per cent at Rs 1,920. HDFC, ICICI Bank, Reliance Communications, Sterlite, Mahindra & Mahindra and Larsen & Toubro were down 4-6 per cent each.

On the other hand, Infosys surged 4 per cent to Rs 2,786, following positive guidance for FY11. TCS too rallied nearly 3 per cent. Tata Steel and Hindustan Unilever were the other prominent gainers.

The Sensex has made a lower high and low on the weekly charts, and ended fairly below its short-term support of 17,700. Going forward, this level is now going to act as a resistance. Above which, the index may spurt to 17,825-17,880. On the downside, the index is most likely to test 17,300, as it coincides with the 38 per cent retracement of the recent nine-week rally.

The NSE Nifty moved in a range of 109 points, from a high of 5,382, the index dropped to a low of 5,238, and finally ended with a loss of almost 100 points at 5,263.

The Nifty is likely to face considerable resistance around 5,290, which is the short-term (20-day) moving average of the index on the daily charts.

The daily moving average covergence/divergence (MACD) indicator shows a bearish tone, and the weekly MACD is marginally positive. The Directional index, too, is on the verge of entering sell mode on the daily charts. Given the multiple week momentum indicators, it would be prudent to say that the downside is likely to continue next week.

The short-term moving average for the Nifty is at 5,100, and seems to be the most likely target for the index.