Resistance at higher range
Last week, the Sensex opened at 38348.39, registered a high at 38354.52 and moved to a low of 37342 before it closed the week at 38090.64 and thereby showed a net fall of 299 points on a week-to-week basis. Once again last week had an intra-week fall from 38389 on Friday, 7th September, to 37342 and recovered at close to 38090 thereby trimming the fall and creating a lower shadow suggesting support at lower level as selling continued for the second week in succession.
A new up-trend surfaced on Friday as the Sensex had fallen below the DRV since last week. A pullback of the fall from 38989 to 37342 is in progress and may test 61.8% retracement level which is at 38354. On Friday, we saw a gap up opening that continued up for an intra-day rise. A swing bottom is in place for a pullback to resistance levels at 38098 and 38348. Further upside momentum will continue if it sustains above 38422.
The Support gap is at 37859-37342 and the support from the swing bottom low of 37342.
Resistance will be at 38354-38934. Support will be at 3777437342.
Downside movement will continue on a fall and close below 37342. A fall and close below 37300 will indicate continuation of correction to retracement levels of 36490, 35657 and 34937.
In the event of a breakout and close above 38990, expect a rally towards 40000 and 41654. Supply zone is at 38416-39000, which will attract resistance and profit booking pressure unless an immediate decisive breakout above 39000 is witnessed.
The current monthly bar chart for September 2018 shows an In Bar, which suggests that the next major decisive breakout or breakdown is outside the range of 37128 and 39000.
Since the market is moving into a higher top and higher bottom formation, the bias may remain to move for a breakout above 39000 eventually.
BSE Mid-Cap Index Weekly chart:
Support will be at 16077-15850. Resistance is at 16605 and 17017. Sideways volatility in the near-term can be seen between 17017 and 15850 unless an immediate fall and close below 15850 is witnessed on closing basis.
BSE Small-Cap Index Weekly chart:
Expect sideways correction/volatility above 16270 unless it immediately falls below 16270. The band of movement for near-term can be 16270-17335. A breakout and close above 17335 is essential to confirm broad market participation on the positive side.
Strategy for the week
Last week yet again, the Sensex moved below 37559 but closed above 37774, which suggests support. Traders and short-term investors still long and holding can maintain the stop loss alert at 37342. The objective remains to book profits and exit long positions or reduce the long position exposure in the supply zone of 38416-39000 as the opportunity arises. Resistance is at higher range and a decisive breakout above 39000 is essential to continue the higher top and higher bottom formation.