Wkly Tech Analysis: Sensex could test 18,776 on positive momentum

The markets displayed immense strength for the better part of the week, and despite Friday’s sell-off the BSE benchmark index Sensex ended with a gain of 483 points at 18,212. The index after a gap-up opening went on to touch a high of 18,691 — up nearly 1,000 points for the week. However, profit taking curtailed gains on Friday.

Among the index stocks, Jindal Steel zoomed almost 10 per cent to Rs 679. Tata Steel and SBI surged around 7 per cent each to Rs 638 and Rs 2,755, respectively. Bajaj Auto, Tata Power, HDFC Bank, Larsen & Toubro, Tata Motors, Jaiprakash Associates, Bharti Airtel, Hindustan Unilever, Maruti and HDFC gained 4-6 per cent each. However, DLF slumped 6 per cent to Rs 233. Reliance Communications, ONGC, Mahindra & Mahindra, Reliance Infrastructure and Cipla were the other prominent gainers.

The Sensex is now interestingly poised. Although one can say the bias looks positive, yet the index may look to fill the gap created on Monday. The index has created a gap around 17,750-17,850; in case of sustained profit taking, one can assume this gap may be filled during the week.

Since the bias is positive — as the momentum indicators suggest — one can expect the Sensex to move higher and test its 200-DMA (Daily Moving Average) which is around 18,776, above which the index can scale up to 19,200.

However, it may be noted that we are currently in an intermediate trend — a pullback with a bigger bear market. Hence, while the overall bias remains negative one can expect such short rallies to occur time and again.

The NSE Nifty moved in a range of 259 points, from a low of 5,340 the index rallied to a high of 5,599, and finally settled with a gain of 149 points at 5,459.

The long-term charts indicate the Nifty has retracted more or less from its key resistance area of 5,560. The index needs to close above this level for a sustained up move, which can extend up to 5,850-5,900. On the downside, the index may eventually target 4,700 during the course of the year.

For the short term, having faced resistance around 5,560, the index may now slip back to fill the gap around 5,310-5,340. One can expect significant support around 5,350.