Wkly Tech: Crucial trading sessions ahead

The markets ended the penultimate week of the year on a weaker note. The Sensex remained in the red throughout the holiday-shortened week as derivates expiry and the India-Pakistan tension weighed on the market sentiment.

The Sensex, which was in the overbought zone, saw a more-than-expected downside with the benchmark sliding 7.6 per cent (771 points) to 9,329. Among the index stocks — Jaiprakash Associates, Mahindra & Mahindra, Satyam, Tata Motors, Reliance Infrastructure, ICICI Bank, Sterlite, Hindalco, Reliance, DLF and Bhel — dropped 10-17 per cent each.

Geo-political factors followed by the quarterly numbers are likely to dominate the market sentiment for a while. Around this time last year, the index was holding the 20,000-mark. So steep has been the fall that the index is most likely to end the year with a loss in excess of 50 per cent.

Further downside could see the index take support around the 9,000-9,100 levels, while on the upside, the index is likely to face resistance around 9,670.

The NSE Nifty touched a high of 3,110, then slipped to a low of 2,845 — down 266 points from the week’s high. The Nifty finally ended the week with a loss of 220 points at 2,857.

The Nifty is precariously poised just below its short-term (20 days) and mid-term (50 days) daily moving average (DMA). While the short-term DMA is 2,873, the mid-term DMA is 2,908. With both lines converging and the index at around the same levels, it indicates some crucial trading sessions in the coming days.

As and when the short-term DMA crosses the mid-term DMA, the trend will change to positive. However, for this to happen, the index needs to sustain above the 2,800-mark for the next three-four trading sessions.

As per the fibonacci analysis, the Nifty is likely to find support around 2,755 in the short term and will face resistance around the 2,900-2,960 levels. A sustained break of 2,750 could accelerate the fall in the index.