The markets are on a dream run so far this year. After having slumped nearly 25 per cent in 2011, the BSE and the NSE benchmark indices have gained nearly 12 per cent this year. In absolute terms, these have recovered around one-third of the losses in the previous year.
The Sensex ended higher for the fourth straight week this year, up three per cent at 17,234. The most positive aspect of the holiday-shortened week was the index climbed higher peaks through the week.
Among the index stocks, Maruti and Tata Motors were the major gainers, up 10 per cent each. Bharti Airtel, Larsen & Toubro, Mahindra & Mahindra, SBI, Sterlite Industries, ICICI Bank, Infosys and Tata Steel were the other major gainers. On the other hand, Hero MotoCorp plunged 6.5 per cent. Bajaj Auto, DLF, Jindal Steel, HDFC Bank and Coal India were the other notable losers.
The Fibonacci charts indicate the Sensex has now given a buy signal on the quarterly charts. So the trend is likely to remain up as long as it is able to sustain above 16,500 on a quarterly basis (March-end).
The next hurdle is at 17,560 (R1 - first resistance) on the yearly charts. According to these, the bias will remain positive as long as the index sustains above 16,700 and get stronger once it sustains above 17,560.
The above two indicators summarise the markets are in an uptrend and on dips the Sensex is likely to find considerable support in the 16,500-16,700 range. However, once it trades below 16,500, one should start exercising caution as that could signal an end to the current uptrend.
The NSE Nifty moved in a range of nearly 200 points and ended with a gain of over three per cent at 5,205.
The Nifty has closed bang on its 200-day daily moving average (DMA). The index has not been able to close above its 200-day DMA since early May 2011. Given the positive momentum indicators, it seems set to cross this psychological level for now.
However, going ahead, the index is likely to face considerable resistance around 5,250 - which is the 50-WMA (weekly moving average). Above which, this uptrend could face another major resistance around 5,370, the higher end of the Bollinger Band on the weekly charts.
In the near term, the markets may now turn choppy, given the near overhead resistance (5,250) and overbought conditions on the daily charts (RSI is above 75 per cent). The wide consolidation range for the Nifty could be 5,250-4,950.
Next week, the index could face resistance around 5,280-5,325, while seeking support around 5,130-5,080.