Swings between 34400 and 37000
Sideways volatility continued on the daily and weekly charts. The Sensex closed in opposite directions on alternate weeks since 30-11-2018.
The volatility band is 34400-37000.
Last week, the Sensex opened at 36239.55, registered a high at 36285.46 and fell to a low of 35382.07 before it finally closed the week at 35695.1 and thereby showed a net fall of 381 points on a week-to-week basis.
The daily chart shows oscillation around the DRV after the Sensex crossed the high of the last few days. The Sensex has formed ten swing tops and bottoms since the first week of November 2018. The daily chart has a critical trend line from 34426 and 35010. The trend was tested on Friday and recovery closed higher.
A fall and close below 35382 on the daily chart will lead to a breakdown of the head and shoulder pattern to confirm the end of Wave ‘b’ structure and resumption of Wave ‘c’ structure. Contraction of movement after the recent volatility may be happen before a momentum based direction, surfaces.
A sharp volatility swing on the weekly chart was witnessed in the last 5-6 weeks. Sustainability above 34400 is critical for the weekly chart. A breakout above 37000 is needed on the weekly chart. Till then, the wider band remains at 34400-37000.
The resistance levels on the weekly chart are placed at 35832-36194 while its support levels are placed at 3560735470-35382.
A breakout above 36555 with a bullish candle could extend the pullback towards 37700.
A breakdown below 35300 with a bearish candle could push the index lower to 34945-33291-32483.
For calendar year 2019, the resistance levels for the Sensex are placed at 39216 and 45722 while its support levels are placed at 35850, 32710 and 26204.
The year 2019 is likely to be good as long as 32483 is not violated. The markets eventually need a breakout and a sustained movement above 39200. As the Sensex nears the higher levels of 39000-39200, profit-booking pressure is likely to build up.
The minimum upside for the year 2019 is 39216, which could extend to 45722 as long as 32483 is not violated.
In the first 3-6 months of 2019, the Sensex may remain rangebound between the high and low registered in
2018 i.e. 38989 - 32483.
BSE Mid-Cap Index
Weakness could resume below 14900 in the near term. A pullback will continue only above 15601 closing. Currently, the movement is sideways between 14900 and 15600.
BSE Small-Cap Index
The range of movement for the near term is 14856 - 14225. The next directional movement is likely on a sustained movement outside the band of 14856-14225.
Strategy for the week
Traders who are long can maintain the stop loss of 35300. The resistance levels are placed at 35832-36194, which can be used to exit long and book profits. Broadly, as long as the Sensex does not cross 36555 on a weekly closing basis, the general objective should be to book profits.