Week Ahead: Strong resistance at 13600

MACRO TECHNICALS

The current trend, especially on Friday, looks weak; so expect a minor correction.

It was an almost neutral week for the major indices but there were sharp gains across the IT and banking sectors. The Sensex gained 1.1 per cent, closing at 13429 points. The Nifty was up 0.47 per cent. The Defty lost ground as the rupee dipped.

Breadth signals were poor. Advances were outnumbered by declines. The BSE 500 was up 0.32 per cent and volumes were good however. The Bank Nifty were up by a massive 6.28 per cent while the CNX IT index was up a significant 1.89 per cent.

Outlook: The Nifty/Sensex combo is hitting serious resistance at around 3900/13600. Our most recent price-target was about 3950 and that could be hit on an intra-day basis.

But the current trend, especially Friday looked on the weak side, so a minor correction could occur. There is support at 3750 (and also 3800). If 3750 is broken, the correction could turn into a major sell off.

Rationale: We have seen weak momentum and breadth signals for several weeks in a row. However, the price line continued to gain.

There were indications last week that the price trend is finally weakening