Weekly Technicals - Apr 12 2009

The Sensex ended higher yet again with a gain of nearly 4.5 per cent at 10,804 in a highly volatile week. In the process, the index has now soared nearly 30 per cent (2,478 points) in the last five trading weeks.

Among the index stocks, Jaiprakash Associates was the top gainer with a gain of almost 18 per cent. Tata Steel, Larsen & Toubro, Reliance Infrastructure, Tata Motors, ICICI Bank, DLF, Reliance Communications and HDFC gained in the range of 8-16 per cent.

As mentioned last week, the target for the current rally remains 12,600 which could be achieved in the next couple of months. In the coming week, the index is likely to face some resistance around the 11,000-mark, and further up at 11,200. The 11,000-mark is R3 (Resistance 3 or 0.62 per cent retracement of the February range) on the monthly charts, and 11,200 is R3 on the quarterly charts.

Since, the rally has been so sharp and the 14-day RSI (Relative Strength Index) continues to remain in the overbought zone, profit taking or a sharp retracement in coming days cannot be ruled out.

The chances of a pull back or some profit taking before the index hits 12,600 are high. Going forward, factors such as general election, corporate results and global markets will weigh heavy on the market sentiment. Hence, the volatility is likely to remain high.

The base for the current rally is 9,650-9,710. Only consecutive close below these levels would change the trend back to the negative zone.

The NSE Nifty moved in a range of 252 points, from a low of 3,149, the index moved to a high of 3,401, and finally ended with a gain of 4 per cent at 3,342.

This week, the index is likely to test its 200-DMA (simple daily moving average) at 3,437. The index may face some resistance around these levels before continuing its upward journey. Above this, the Nifty is likely to rally to 3,470-3,500.

However, in case of a downside, the index is likely to find support around 3,245-3,185. Once 3,185 is breached, the index may see a steep fall towards the 3,000-mark