A sharper dip ahead

Weekly Technical Analysis

The markets slipped last week on the back of global weakness. The major Asian markets such as the Hang Seng and Nikkei were down over 5.5 per cent each to 28,783 and 15,583, respectively. The Shanghai Composite index plunged 8 per cent to 5315.

The Sensex ended in red throughout the week, shedding 5.3 per cent (1,068 points) to 18,908. The index swung in a range of 1,272 points. From an opening high of 20,009, the index dropped to a low of 18,737.

Last week, we had mentioned that the index may consolidate and test its near support of 18,660. The index is quite close to its support level. In case the support fails to hold, which seems quite possible, the index may take a sharper dip towards its major support area of 17,300-17,000.

However, the markets are likely to remain in bullish mode as long as the Sensex stays above the mentioned support level. The Sensex is likely to face resistance around 19,400-19,550-19700 this week. It has a support around 18,420-18,270-18,120 on the downside.

The NSE Nifty moved in a range of 342 points, from a high of 5957 and a low of 5615, before settling with a loss of 4.5 per cent (269 points) at 5663. The index briefly dipped below the support level of 5675.

The next significant support level for the Nifty is around 5425, below which the index may drop to 5000 level. The index may face resistance around 5795-5835-5875 this week and on the downside, it is likely to find support around 5530-5490-5450.

The Nifty Moving Average Convergence Divergence (MACD) is bearish since it is trading above its signal line. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", functions as a trigger for buy and sell signals.