Consolidation continues till 34600 is not violated
Last week, the Sensex opened at 36396.69, made a high at 36446.16 and moved to a low of 35266.72 before it closed the week at 35673.25 and thereby registered a net fall of 521 points on a week-to-week basis.
We have seen opposite closings in alternate weeks since the past 3 weeks because of which the Sensex witnessed sideways volatility. The rate of change every week over the last three weeks has been -1.44%, 3.47% and -1.34%. The net effective rate of change over 3 weeks is 0.61%, which demonstrates sideways movement. The band of movement created is 36446-34672.
The daily chart support and higher bottoms are at 35266, 34896 and 34672. The fall witnessed in the last few days was from 36446 and 35266. The 61.8% retracement level is placed at 35995.
Weakness may resume below 35266. Till 35266 is not violated, expect a rise to 35995.
In the last edition, we had mentioned that the rise witnessed two weeks back was of 1,213 points and a dip was anticipated to the support level.
The support level of 35826-35263 was for accumulating. The low registered last week was 35266 while the weekly closing was at 35673.
An alternate bearish and bullish candle was seen over the last 3 weeks, which resulted in sideways volatility without much weekly gains in this 3-week scenario. The gain in the last 3 weeks was just 0.61%.
The bearish candle last week suggests that resistance will remain at the higher range till a breakout and weekly close above 36446 is not witnessed.
The resistance levels for the week are placed at 35795-36324-36446-36841-36945. Broadly, till 37000 is not crossed, the objective remains to book profits in the higher range and trade long at lower levels till 34672 is not violated.
The support levels are placed at 34896-34672.
BSE Mid-Cap Index
An engulfing bearish candle on the mid-cap index suggests resistance in the higher range and selling till 15162 is not crossed.
The resistance levels are placed at 14830-15048.
The lower range is 14499-13950.
BSE Small-Cap Index
A bearish candle suggests that the resistance levels of 14249-14418 and the lower range of 13935-13453 could be tested with volatility.
Strategy for the week
Traders long can maintain the stop loss of Sensex 34600.
The resistance levels are placed at 35795-36324-36446. Traders can book profits at 36324 and re-enter long if the weekly close on Friday is above 36446.
Traders can buy above 36446 with the low of the week as the stop loss or 35266, whichever is lower.