Wkly Tech Analysis: Overbought zone to cap upmove

Stock-specific action was the theme of the markets this week, as benchmark indices moved sideways. Despite this, the benchmark indices have entered the overbought zone along with some key heavyweights, especially from the IT, auto and banking space, and also some cement stocks. This does not mean that the markets should fall. However, the upside looks limited from current levels. Hence, some profit-taking is advocated and we may see a weekly loss after five weeks of gains.

The Sensex touched a high of 17,245 and ended with a gain of 172 points at 17,167. Among the index stocks — Mahindra & Mahindra and ITC surged 5.7 per cent each to Rs 1,076 and Rs 245, respectively. HDFC rallied 5 per cent to Rs 2,584 and TCS added 4.5 per cent to Rs 762. On the other hand, Hindustan Unilever slumped 9.5 per cent to Rs 220. Reliance Communications, Tata Motors, Reliance and NTPC declined 3-5 per cent each.

The markets, though overbought, may see limited fall from current levels. Technically, the Sensex has immediate resistance at 17,250, above which the index may spurt to 17,300, and finally to 17,465. In a slightly longer term, the index may move up to 17,800, while a target of 19,900 is also possible by the year-end.

Next week, one should closely watch the 17,060 level. If the index trades continuously below this level, then there could be a dip towards 16,800 in a worst case scenario next week.

The NSE Nifty moved in a thin range of 66 points, from a low of 5,092, the index moved up to a high of 5,158, and finally settled with a gain of 48 points at 5,089.

The target for the current upmove is at 5,325. However, given the overbought situation, there is a possibility of a dip towards the 5,000 level. Next week, the index may face resistance around 5,160-5,178, while it may seek support around 5,110-5,095.