Weekly Technical Analysis - Aug 9 2009

The stock market witnessed some profit-taking last week as monsoon worries resurfaced. The BSE benchmark index, the Sensex, crossed the 16,000-mark briefly to touch a high of 16,002. However, it slipped to a low of 15,104 towards the end of the week. The Sensex finally ended the week with a loss of 510 points, or 3.26 per cent, at 15,160.

Among index stocks — Jaiprakash Associates and Maruti with losses of around 9 per cent each were the biggest losers. ITC, Hero Honda, Reliance Communications, Hindustan Unilever, HDFC Bank, DLF, Bharti Airtel, HDFC and Tata Power were down 6-8 per cent each. On the other hand, Sun Pharma, Reliance and Wipro declined only around 2 per cent each.

Going forward, the monsoon factor is likely to remain a major dampener. Any negative cues from world markets could also have a spillover effect on our markets.

This week, the Sensex is likely to exhibit a rangebound movement with the upside seemingly capped around 15,700, and the downside support around 14,700. The Nifty came down by 155 points, or 3.34 per cent, to 4,481, after moving in a range of 4,731-4,464.

The index is currently below its short-term (15-days) simple moving average, which is a negative indicator. However, the short-term moving average, currently at 4,565, is above the mid-term (45-days) simple moving average of 4,391, which is a positive indicator. The bollinger bands have also narrowed down to 4,735-4,391, hence, in the coming week one could see movement in a narrow range.

On the downside, the mid-term moving average at 4,391 should act as a good support. In case, the index drops below 4,391, than it may slide up to 3,943 — its long-term (200-days) simple moving average.