Weekly Technical Analysis - Oct 11 2009

Despite the 2.72 per cent-correction last week, the Nifty managed to close above its trendline support on Friday. The index ended the week with a loss of 138 points at 4,945. Although, the Nifty has ended marginally below its short-term (20-day) Daily Moving Average (DMA)of 4,957, the index ended above its trendline support around 4,920.

Going forward, the index may seek support around 4,900-4,920, below which the index may slide all the way to 4,740, which is the medium-term (50-day) DMA. Caution is the buzzword, as a number of oscillators — Moving Average Convergence/ Divergence (MACD), Relative Strength Index (RSI) and Stochastic Slow — are showing negative divergence. Any move from the current levels, could see the index face resistance around 5,120.

However, the medium-term picture remains positive as long as the index remained above 4,740. The upside targets mentioned last week of 5,350 and 5,500 remain valid with a timeframe of year-end, till violation of the above mentioned support level.

The BSE Sensex, moved in a range of 492 points. The index touched a high of 17,121 and a low of 16,607, before settling with a loss of 2.87 per cent at 16,643.

Among the index stocks — Reliance Communications and Bharti Airtel tumbled over 21 per cent each. Grasim, TCS, Maruti, Wipro, SBI and Infosys declined 6-11 per cent each. On the other hand, Hindustan Unilever surged over 8 per cent. Reliance Infrastructure, ITC, Tata Steel, BHEL and ONGC gained 3-7 per cent each.

The BSE index is now closer to the support zone of 16,400-16,450. Below 16,400, the index also has some support around 16,260.

A break below 16,260 could result in a larger correction all the way to around 14,800. The upmove will regain momentum only after the Sensex crosses this week’s high.

Next week, the Sensex may face resistance around 16,840-16,900-16,960, while support on the downside could be around 16,445-16,385-16,325.

via BS