Wkly Tech Analysis: Nifty may sustain above 2,850 level

The major support mentioned last week for the Nifty was 2,500, where one could have expected the index to make a temporary bottom. Indeed, the index seems to have taken temporary support at the 2,500-level following a strong surge in trading in the last one hour on Friday.

Following three days of losses in the preceding week, the Nifty declined for four more days, making it a seven-day losing streak wherein the index hit a low of 2,503, before bouncing back sharply on Friday with a 140-point gain.

The index touched a high of 2,835 at the start of the week, but then shed 333 points at the low point of week, and finally settled with a loss of 117 points at 2,693. In the process, the index also registered its second straight weekly loss.

Trading activity is likely to be hectic this week also. Thankfully, the overseas cues have been positive, which should lead us to a good start. However, going forward, the derivatives expiry and hopes of some policy announcement from the Reserve Bank of India (RBI) will keep investors on their toes.
 

KEY LEVELS
	Sensex	Nifty
S3	8220	2490
S2	8355	2525
S1	8490	2565
Close	8915	2693
R1	9345	2820
R2	9475	2860
R3	9605	2900
S-Support level R-Resistance level

Technically, the index is likely to give a minimum 200 points, pullback from the current levels, i.e. we could move up to 2,885 levels, above which the index may surprise us with a rally right up to 3,200-mark. However for a sustained upmove, the index needs to trade firmly above the 2,850-mark. It may re-test the 2,500-mark and may even break it this time around.

The bollinger bands continue to get narrower — 2,450 to 3,190. The mid-term (50-day) daily moving average (DMA) at 3,411 continues to remain above the short-term (20-day) DMA at 2,824, which is a negative sign.

The Bombay Stock Exchange’s Sensex moved in a range of more than 1,100-points. From a high of 9,436, the index slumped to a low of 8,316 and then finally settled with a loss of 470 points at 8,915. The index support of 8,550 mentioned last week was easily violated due to a gap down opening on Thursday.

After having gained a whopping 42 per cent (3,248 points) from its October low of 7,697, to a high of 10,945, the Sensex in the last two weeks has retraced 81 per cent of its gain as the index hit a low of 8,316. The probability of the index breaking below 8,300-mark remains high. While on the upside, the index needs to sustain above the 9,800-mark for more upside.