Wkly Tech: Short-term trend positive, but no break-out yet

The short-term market trend turned positive last week after a gap of a little over three months. The Nifty short-term (20 days) moving average closed above the mid-term (50 days) moving average on December 31, 2008, indicating a change in short-term trend to positive. The trend had been negative since September 22, 2008.

The Nifty is nicely placed above its short-term (2,945) and mid-term (2,873) moving averages at 3,047. However, the index is still trapped in the narrow band of 3,150 to 2,750. The index needs a breakout above the 3,150 level for further upside.

Moving in a trading band of 267 points last week (from a low of 2,813), the index rallied to a high of 3,080, and finally settled with a gain of 190 points at 3,047. In the interim, the index ended the year 2008 with a hefty loss of 51.8 per cent (3,179 points).

The last week rally was aided on hopes of a second stimulus package and lack of any substantial selling pressure. Now that the stimulus package has been announced, the markets will be soon shifting focus to the quarterly numbers. Corporate earnings are likely to bear significant impact on the market trend.

Technically, the long-term (200 days) moving average remains negative, with the long-term one placed at 4,062.

As per fibonacci calculations, 2009 could see the index move in a broad range of 1,400 to 5,500. In between, support could be around the 2,050 level, while resistance around 3,800 to 4,500 levels.

The quarterly chart, for the January to March period, indicates a range of 1,900 to 4,050. While the monthly chart indicates resistance around 3,165-3,230-3,300, support on the downside is likely to be around 2,750-2,690-2,625.

The BSE benchmark, the Sensex, moved in a range of 908 points - from a low of 9,163 the index surged to a high of 10,070, and finally ended with a gain of 629 points at 9,958. In the interim, the index ended 2008 with a stupendous loss of 52.5 per cent (10,640 points) at 9,647.

Last week, Satyam zoomed 31 per cent to Rs 178 and was the top gainer among the Sensex stocks. Reliance Communications, Jaiprakash Associates, Reliance Infrastructure, Ranbaxy, Hindalco, ICICI Bank, Tata Motors, Larsen & Toubro and Sterlite gained 10-22 per cent each. However, Hindustan Unilever was down 2 per cent and the sole loser among the index stocks.

As per fibonacci calculations, 2009 could see the Sensex move in a broad range of 18,000 to 4,500. In between, support could be around 6,700 level, while resistance around 12,600 to 14,800 levels.

The quarterly chart, for the January to March period, indicates a range of 6,200 to 13,000. While the monthly chart indicates resistance around 10,300-10,500-10,700, support on the downside is likely around 9,000-8,800-8,600.