Wkly Tech Analysis: Nifty would have strong support at 5,840

Despite the derivatives expiry, the markets moved in an extremely tight range last week. The Sensex moved in a range of 265-odd points. From a low of 19,237, the index rallied to a high of 19,504, finally settling at 19,445, a gain of 203 points.

Among the Sensex-30 stocks, Bharti Airtel and Tata Motors surged about 3.5 per cent each to Rs 318 and Rs 310, respectively, while Wipro and Tata Power rose about three per cent each. Bajaj Auto, Reliance Industries and NTPC were the other major gainers. Jindal Steel slipped about two per cent to Rs 445. Mahindra & Mahindra and Hindustan Unilever were the only other stocks to end with losses of more than a per cent each.

This year was a 'mirror' image of the last. The markets rose like a phoenix this year, with the Sensex soaring about 26 per cent. In 2011, the BSE benchmark index had dropped about 24.7 per cent. The markets trended lower through 2011; this year, they did just the opposite.

Now, on the threshold of 2013, it would be interesting to see what lies ahead. The markets seem to have the capacity to scale a wee bit higher. The Sensex, for instance, seems set to test 20,400-odd levels in the near term. The challenge would be sustaining itself above that level. On the flip side, we could see a decline of about 10 per cent during the course of the year. The yearly charts indicate a strong support area at 17,800-17,300.

On the weekly outlook, the markets seemed tied down in an extremely narrow range. Therefore, watch out for a breakout in the near term. The bias is likely to turn fairly strong on a breakout at levels higher than 19,600. A breakdown below 19,300-odd levels could spell trouble for the markets.

The NSE Nifty moved in a range of 86 points. From a low of 5,845, it rose to a high of 5,931, settling with a gain of 61 points at 5,908.

According to the daily charts, the Bollinger Band for the Nifty indicates a tight range of 100-odd points. The NSE index is likely to move between 5,840 and 5,940. A breakout in either direction should trigger a sharp movement in the same direction. In case of a downward breakout, the next support for the index would be 5,750.

The momentum oscillators on the weekly charts are in favour of the bulls. The index may look to snap back after testing support at 5,840-odd levels. On the upside, the index is likely to rally past the 6,000-mark in the near term.

To sum up, 5,840 remains a major support level for the Nifty in the near term, below which the index could slip to 5,750. A bullish breakout would help the index rally past the 6,000-mark.