Near-term slump can­not be ruled out

The in­dices re­versed di­rec­tion form­ing a bear­ish pat­tern. Key re­sis­tance can limit up­side

The Hindu Business Line - - TECHNICALLY - YOGANAND D

The do­mes­tic in­dices — the Sen­sex and the Nifty 50 — be­gan the pre­vi­ous week on a pos­i­tive note and con­tin­ued to rally. The RBI’s rate cut of 25 ba­sis points last week had a pos­i­tive im­pact on the the mar­ket on Thurs­day. How­ever, Tata Mo­tors’ dis­mal third quar­ter per­for­mance spooked in­vestors and the in­dices slumped on Fri­day. Profittak­ing will limit the up­side in the in­dices in the com­ing week. In­vestors should re­main cau­tious.

Nifty 50 (10,943.6)

Af­ter an ini­tial rally, the Nifty 50 in­dex en­coun­tered re­sis­tance at around 11,100 and did a volte face on Fri­day, tum­bling over 1 per cent. With this fall, most of the ini­tial gain was wiped out and the in­dex closed the week on a mar­ginal gain of 50 points or 0.46 per cent.

The Nifty has formed an evening doji star can­dle­stick pat­tern on the daily chart, which is a bear­ish re­ver­sal pat­tern. The near-term up-move that com­menced in late Jan­uary ap­pears to have come to an end as the pat­tern is formed at a key re­sis­tance level. The in­dex can con­tinue to de­cline in the near term and sig­nif­i­cant sup­ports at 10,850 and 10,750 can pro­vide base in the com­ing weeks.

But fail­ure to find base at these sup­ports can pull the in­dex down to the lower bound­ary of the as­cend­ing chan­nel that has been in place since late Novem­ber 2018. In such a sce­nario, the in­dex can con­sol­i­date side­ways in a wide range be­tween 10,600 and 11,100 for a while.

A con­clu­sive plunge be­low the key base level of 10,600 can drag the in­dex down to 10,500 and 10,400 in the short term. A fur­ther de­cline be­low the vi­tal base level of 10,400 can re­in­force bear­ish mo­men­tum and pull the in­dex down to the next key sup­ports at 10,300 and the 10,10010,000 band.

On the other hand, an up­ward break-out of the chan­nel at 11,100 will al­ter the down­trend and take the in­dex higher to 11,300 and 11,500 lev­els. A con­clu­sive rally be­yond 11,500 can ac­cel­er­ate the in­dex north­wards to 11,600 and 11,750.

Medium-term trend: There is no change in the medi­umterm trend, which con­tin­ued to be down as the in­dex tested the key trend-de­cid­ing level of 11,100 and re­treated. A con­clu­sive break of this bar­rier will al­ter the down­trend and push the in­dex higher to 11,300 and 11,500.

Con­versely, a plunge be­low the key base level of 10,400 will drag the in­dex down to 10,000 lev­els in the medium term. Sub­se­quent vi­tal sup­ports are at 9,900, 9,700 and 9,500 lev­els.

Sen­sex (36,546.4)

The Sen­sex also formed an evening star can­dle­stick pat­tern in the daily chart on Fri­day, which has bear­ish im­pli­ca­tions. The in­dex ended marginally on a pos­i­tive note, gain­ing just 77 points or 0.2 per cent in the pre­vi­ous week. Af­ter test­ing key re­sis­tance at 37,000, it re­versed sharply lower. This down-move can con­tinue in the en­su­ing week and find sup­port at ei­ther 36,200 or 36,000.

A de­ci­sive plunge be­low these sup­ports can drag the in­dex fur­ther down to the lower bound­ary of the as­cend­ing chan­nel at 35,600. Next key sup­ports are placed at 35,400 and 35,000.

A strong down­ward break of 35,000 will un­der­pin the bear­ish mo­men­tum and drag the in­dex lower to 34,600 over the medium term. Sub­se­quent key sup­ports are placed at 34,400 and 34,000. On the up­side, an em­phatic break above 37,000 will al­ter the medium-term down­trend and take the in­dex north­wards to 37,400 and 37,600 over the medium term.

Nifty Bank (27,294.4)

Amid volatil­ity, the Nifty Bank ad­vanced 208 points or 0.77 per cent last week. The in­dex con­tin­ues to test sig­nif­i­cant re­sis­tance at 27,500.

A strong break above this vi­tal hur­dle will strengthen the up­trend and take it up to 27,700 and 28,000 in the short term.

How­ever, an em­phatic plunge be­low the key im­me­di­ate sup­port at 27,000 can drag the in­dex down to 26,500 in the short term.

Traders should tread with cau­tion as long as the in­dex is range­bound be­tween 27,000 and 27,500. A strong plunge be­low 27,000 will be bear­ish and a cue to ini­ti­ate fresh short po­si­tions with a fixed stop-loss.

Tar­gets are 26,700 and 26,500 lev­els. A fur­ther tum­ble be­low 26,500 can drag the in­dex down to 26,000.

But the medium-term up­trend that has been in place since Oc­to­ber 2018 will re­main in­tact as long as the in­dex trades above the key base in the 25,80026,000 band.

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