Wkly Tech: Upsurge with volatility seen

Markets continued their upward journey, backed by renewed global optimism that the worst is over. The Sensex, which began the week on a dismal note, recovered smartly to end with a gain of 300 points at 10,349. In the process, the index has now rallied over 24 per cent (2,023 points) in four weeks.

Among the index stocks, Ranbaxy zoomed nearly 14 per cent. DLF, Mahindra & Mahindra, Tata Power, Jaiprakash Associates, ONGC, Tata Motors, Reliance, Wipro and Reliance Communications jumped 7-11 per cent. However, ICICI Bank plunged nearly 7 per cent, and Hindustan Unilever shed 4 per cent.

During the week, the index dropped to a low of 9,521, then stayed in the 9,550-9,650 band for a long time before making a surge to a high of 10,432. The index seems to have formed an upper base in this 9,550-9,650 band.

In the current phase, the Sensex may target 12,600 in coming months. Given the strong momentum, it is difficult to set a short-term target for the index. However, it could face some resistance around its quarterly (R1) and monthly (R3) levels of 10,635, and 11,000 respectively.

The index is likely to extend the rally for yet another week, but may remain highly volatile as the index is in the overbought zone. Its 14-day RSI (Relative Strength index) is at 77.6 per cent. An RSI of above 70 is said to be overbought.

In case of profit taking, the index is likely to find considerable support around the 10,000-9,800.

The NSE Nifty moved in a range of 266 points, from a low of 2,962, the index rallied to a high of 3,229, and finally closed with a gain of 102 points at 3,211. The index has now gained 22.5 per cent (591 points) so far in the last four weeks.

The Nifty seems to be on course to 3,850. In between, the index is likely to face resistance around 3,250-3,400. The 3,400 level is (R3) resistance on both monthly and quarterly basis. So also, 3,455 is the 200-day simple daily moving average.

The Nifty seems to have formed a higher bottom around the 2,960 level. Next week, the Nifty is likely to find support around 3,110-3,045. On the upside, the index may surge to 3,300-3,375.