Wkly Tech: Sensex likely to test 10,000-mark

Last week, the markets displayed strength despite negative news on the domestic and global fronts. The Sensex moved in a tight range of 649 points.   From a low of 9,096, the index faced resistance around 9,746. The Sensex finally ended the week at the higher end of the trading band at 9,690, a smart gain of 725 points.

The market rally was led mostly by beaten-down realty and metal sectors, while Reliance Industries too played a crucial role in the upmove. Among index stocks, DLF zoomed 36 per cent last week. Jaiprakash Associates, Reliance Communications, Reliance Infrastructure, Sterlite and Tata Steel soared 19-27 per cent each. Reliance Industries, Mahindra & Mahindra, ACC, ICICI Bank, Grasim and HDFC rallied 14-17 per cent each. However, technology stocks did not participate in the upmove. TCS declined nearly 8 per cent, while Infosys and Satyam too ended in the red.

The Sensex is now close to its first major resistance level for the month at around 10,100, above which the index could rally up to 10,730. The given strength in the market indicates that the index is likely to test the five-digit mark in the very near term.

On the downside, the 9,290-level is an important support and 9,100 in case of a bigger fall. A break-out at 9,100 will indicate an end to the current upmove.

The NSE Nifty, as expected, moved in a narrower band of 231 points from a high of 2,945 to a low of 2,715. The index ended with a gain of 207 points at 2,921.

The Nifty is on the verge of an upside break-out and a couple of closes above 2,948 could see the index gather further strength. The bollinger bands are at 2,546-2,948. On the downside, the 2,745-level will be a strong support and a base for the current upmove.

However, one needs to be cautious as some of the technical indicators are moving into over-bought zones, like the Stochastic slow. Besides, the nine-day RSI (Relative Strength Index) has moved above 60 per cent, a level last seen at the start of September.