Sensex to test lower top of 35605
Last week, the Sensex opened at 33549.87, made a low at 33341.80 and moved to a high of 35190.19 before it closed the week at 35011.65 and thereby registered a net rise of 1,662 points on a week-to-week basis.
A recovery was witnessed from the lower support level last week. Now, expect the lower top of 35605 to be tested in the near-term. A breakout and close above 35605 with a bullish candle could resume the retracement of the fall from 38989 to 33472. The retracement levels are placed at 35472, 36162 and 36832. Crossing the lower top at the end of the week on a closing basis is important as we may witness a change of sequence in the lower top and lower bottom formation in the fall from the peak of 38989 to 33742. Support levels on the daily chart are placed at 34649-34303.
A fall and close below 34300 could trigger the downward movement again where-after it could test back the last bottom of 33291.
A strong weekly rise of 1,662 points covered 78.6% of the fall from the high of 35605 in the last 4 weeks. The resistance level of 35605 may be tested. Higher range for the week is 35687-37535. The support levels are placed at 34514-33838. The demand zone of the last major swing bottom is 3337132483. Lower range has a lot of support for recovery and even if a gap down is witnessed recovery will be seen unless 32483 is
violated. The issue that crops up post recovery is sustainability in the higher range.
A breakout and close above 35605 is essential to trigger a pullback or mark a major reversal to test the peak of 38989. Pullback retracement levels of the fall from 38989 are placed at 35472, 36162 and 36832. If a follow-up rise to last week’s recovery is witnessed, then a rise towards the 61.8% retracement i.e. 36832 can be witnessed in the near-toshort-term.
A breakout is essential as the failure to sustain at the higher range could trigger the downward movement once again. The index may attempt to test 35605 to mark a reversal.
BSE Mid-Cap Index Weekly chart:
The recovery on the BSE-Mid Cap index was good as it registered the highest closing of last 4 weeks. Expect the rise to test 15287 and 15674. The rise was huge last week. Therefore, an intra-week correction to test the support of 14602-14153 will be witnessed.
The BSE Mid-Cap Index will attract support at the lower levels unless the fall is sharp and vertical. Lower levels will attract accumulation in mid-cap stocks.
BSE Small-Cap Index Weekly chart:
The BSE Small-Cap index rise was comparatively weak in relation to the BSE Mid-Cap index. The resistance of 14751 will be tested. A further breakout above 14751 is essential. Weakness may resume below 13396.
Strategy for the week
Traders short can maintain the stop loss at 35606.
Cover short positions at 34514 or below as and when the opportunity arises.
A reversal is above 35605 and if the Sensex closes above this level, then long positions can be added. Contrarian long positions can be undertaken at 34514-33838 with a stop loss of 32483. After testing the support of 32483 in the last couple of weeks, the Sensex has bounced back to test the lower top of 35605.