The markets could start the week on a positive note, with the Sensex expected to climb to around 15,380-15,400 and the Nifty to around 4,480-4,500. However, we expect selling pressure to set in at higher levels, and this could push down the major indices to levels of around 14,900/4,300. These levels could act as strong support as they did during the major sell off last week.
Technical Parameters: In the weekly charts of the week before last (week ended July 27) there was a downward bar reversal. This pattern at the top is a bearish sign and means that the ongoing rally can be halted and some correction is likely to occur in the subsequent period. This was also accompanied by weakness displayed by the oscillators (RSI).
The RSI (relative strength index) also displayed negative divergence, which means that prices continue to make higher tops, but the corresponding oscillator levels make lower tops. This occurring in the overbought zone indicates that selling pressure is likely in the coming days. Last week, there was heavy selling, which had pulled down the indices from their highs of 15,569/4,534.
However, they have taken strong support at the levels of 14,900/4,300. Further weakness is likely to continue only when these levels are broken and then the next support is at around 14,680-14,700/4,280-4,300 levels. A close look at the sectoral indices suggests that most of them, despite showing a weak trend, are near their support levels and are likely to bounce back from the current levels.
This is the reason why we see the markets bouncing upwards for the initial part of the week. The weakest among the indices are BSE Auto/BSE IT and BSE Healthcare and the ones displaying strength are BSE FMCG and BSE Bankex.
Conclusion: To conclude, the market in the coming week or two may witness a move in the range of 14,680-15,450/4,300-4,530. For long-term investors any correction around 14,700 to 14,800 will be an excellent opportunity to accumulate good stocks as our long-term (12-to-15 months) target for the indices is around 16,500-16,750/4,700-4,780. However, short-term investors may use any rally to book profits and wait for an opportunity to buy back at lower levels. Directional traders can sell short around 15,400-15,450 levels with a strict stop-loss of 15,600 for a target of around 14,700.
Technical Parameters: In the weekly charts of the week before last (week ended July 27) there was a downward bar reversal. This pattern at the top is a bearish sign and means that the ongoing rally can be halted and some correction is likely to occur in the subsequent period. This was also accompanied by weakness displayed by the oscillators (RSI).
The RSI (relative strength index) also displayed negative divergence, which means that prices continue to make higher tops, but the corresponding oscillator levels make lower tops. This occurring in the overbought zone indicates that selling pressure is likely in the coming days. Last week, there was heavy selling, which had pulled down the indices from their highs of 15,569/4,534.
However, they have taken strong support at the levels of 14,900/4,300. Further weakness is likely to continue only when these levels are broken and then the next support is at around 14,680-14,700/4,280-4,300 levels. A close look at the sectoral indices suggests that most of them, despite showing a weak trend, are near their support levels and are likely to bounce back from the current levels.
This is the reason why we see the markets bouncing upwards for the initial part of the week. The weakest among the indices are BSE Auto/BSE IT and BSE Healthcare and the ones displaying strength are BSE FMCG and BSE Bankex.
Conclusion: To conclude, the market in the coming week or two may witness a move in the range of 14,680-15,450/4,300-4,530. For long-term investors any correction around 14,700 to 14,800 will be an excellent opportunity to accumulate good stocks as our long-term (12-to-15 months) target for the indices is around 16,500-16,750/4,700-4,780. However, short-term investors may use any rally to book profits and wait for an opportunity to buy back at lower levels. Directional traders can sell short around 15,400-15,450 levels with a strict stop-loss of 15,600 for a target of around 14,700.
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