Broad market indices dominate
Last week, the Sensex provided the follow-up rise to the breakout witnessed two weeks back above 32700. The expected level of 33600 was tested last week. The Sensex opened at 33260.10, attained a low at 33164.28 and moved to a high at 33733.71 before it closed the week at 33685.55 and thereby showed a net rise of 528 points on a week-to-week basis.
The daily chart shows the uptrend, which becomes clear if one observes the line chart. The candle at times provides more quality information of the price behavior but volatility could disturb the mind. The candle shows the Hanging Man, which suggests that immediate support is at 33527. A fall below 33527 can bring about minor intra-week correction to weekly support levels.
Overall, the uptrend is expected to continue with intra-day or intra-week corrections to show strong candles overall on the weekly chart.
The higher range for the week could be 33891-34460. Support during the week will be at 33527-33321-33164. The 161.8% retracment of the fall from 32686 to 31081 was tested and therefore, intra-week correction could happen.
On a further sustained rise and close above 33733, expect the rise to test the week’s higher range. But the objective could be to move towards the 261.8% retracement of the fall from 32686 to 31081. The 261.8% retracement level is at 35215.
In the January and February 2017 issues, we had forecast the yearly levels for the Sensex. The levels indicated were 29637 and 36220. Currently, the Sensex is at 33685 and is now chasing 36220 by December 2017. The years 2016 and 2015 were indecisive candles after the bull run in 2014. The year 2017 is the continuity of the same bull run as a breakout above 30024 as seen on the yearly chart.
On the monthly chart, the October 2017 is a breakout above its higher top of 32686, which suggests continuation of the momentum of the higher top and higher bottom formation from 22494.
The Sensex is potentially looking to test 36220–Yearly Level 4 by December 2017. Assuming the year end now, the year 2018-First level, which is Yearly Level 3, will be at 36130. Yearly Level 4 by December 2018 is 43417. During the year 2018, if a correction is witnessed, then the Yearly Center point is at 31288 and Yearly Level 2 is 28843. The focus is more on the higher levels. Expect the Yearly 2018 to show higher low and higher high at the end of 2018 with a positive yearly candle.
Trend based on Rate of Change (RoC) Daily chart:
1-Day trend - Up 3-Day trend - Up 8-Day trend - Up
1-Week trend - Up 3-Week trend - Up 8-Week trend - Up
1-Month trend - Up 3-Month trend - Up 8-Month trend - Up
1-Quarter trend - Up 3-Quarter trend - Up 8-Quarter trend - Up
1-Year trend - Up 3-Year trend - Up 8-Year trend - Up
BSE Mid-Cap Index Weekly chart:
1-Week trend - Up 3-Week trend - Up 8-Week trend - Up The expected level of 16824 is almost attained as the high last week was 16808. Expect resistance and profit-booking around 16824. The next leap is huge. Therefore, expect minor sideways movement to consolidate at the current level for a couple of weeks before the next rally. Alternatively, the rally will have to get sharp and vertical to notch up 17898.
The overall support will be at 16426-16379
BSE Small-Cap Index
1-Week trend - Up
3-Week trend - Up
8-Week trend - Up
Expect a rally to 18234. A reversal for deeper correction can be below 17300 and till then, a correction is an opportunity to accumulate.
Relationship of Mid-Cap/Small-Cap/Sensex
From the year 2007 to 2013 broadly, we can see that the Sensex had outperformed. From 2014 to 2017, the Mid-Cap and Small-Cap indices improved their performance relatively. The Mid-Cap and Small-Cap indices are on par with little to separate. The role of Mid-Cap and Small-Cap indices is getting dominant and is likely to continue unless a catastrophic fall is witnessed, which looks unlikely till Yearly Level 4 of 2017 (36220) on the Sensex is not attained.
Strategy for the week
Traders long can revise the stop loss to 33100. Expect the higher range of 33891-34460 to be tested. Intra-week support point of 33527-33321 can be used for buying if the lower levels are attained first. Maintain the stop loss of 33100.