Sensex 32483 is critical monthly support
Last week, the Sensex opened at 34971.82, made a high at 35605.43 and moved to a low of 34140.32 before it closed the week at 34315.63 and thereby registered a net fall of 417 points on a week-to-week basis. The pullback rise was terminated at the weekly resistance range of 35153-36288.
A gap down on Friday after a large bearish candle on Wednesday marks a swing top for a lower top on the daily chart. A gap up was seen from 35162 to 35543 last Wednesday. Last week’s high was 35605 and the Sensex tested the DRV. Subsequently, a slide was seen followed by a gap down on Friday. Expect the Sensex to test the last swing bottom of 33723, which could be violated for a further downside movement. Resistance gap is placed at 34563-34779. A rise and close above 34780 can show a near-term rise towards 3491335215.
Currently, the trend appears to be down for a lower top and lower bottom formation with volatility.
Overall, a breakout and close above 35605 is needed to mark a major reversal and till then, the objective remains to exit long and sell on a rise.
The resistance levels are placed at 34687-35233-35605 while the support levels are placed at 33354-32483.
The retracement levels of the rise from 22494 to 38989 are placed at 32565-30680-28716.
Expect 32483 to be tested in the near-to-short-term with volatility.
In May 2014 when the NDA government came to power, the Sensex closed at 24217. Subsequently, it registered a high at 30024 in March 2015 and fell to 22494 in February 2016. The lowest level registered by the Sensex under the current government’s tenure till now is 22494. The major higher bottom on the monthly chart is at 32483, which can be tested. If the Sensex closes below 32483 on a monthly basis at the end of October 2018, it could slip further to 30024, 29077, 25717 and 22494. If 32483 is violated on a monthly closing basis, then it could slide further to 22494 in 2019.
The next few weeks will be critical for the markets and will have an impact on the monthly chart.
A pullback from 32483 may take place for a rise towards 36443. Crossing the top of 38989 looks unlikely but if the markets recover from 32483, a pullback rally for the ‘b’ structure or ‘right shoulder’ could develop.
BSE Mid-Cap Index Weekly chart:
An overall weakness will continue below 13538 and resistance will be at 14239-14708. An upside movement is likely above 14708 closing. Till then, expect resistance and selling pressure to continue.
BSE Small-Cap Index Weekly chart:
The resistance levels are placed at 14272-14562 while the support levels are placed at 13792-13396. There is a possibility for a reversal above 14751. Till then, use the rise to exit long.
Strategy for the week
Exit long and sell on a rise to the weekly resistance levels of 34687-35233 with a stop loss of 35610. Expect the lower range of 33763-32303 to be tested. Support of 32483 can be critical for the monthly chart and it could be tested in the near-term.