If the index is able to sustain at the upper channel value and crosses it comprehensively then the market observer's would be surprised to see it exhibiting a spike to 7274 and 7450 which are 1.382 and 1.618 level of the fall from 6954 to 6118.
Looking at oscillators, MACD, which has triggered a buy on May 3, 2005, has not yet triggered a sell, RSI is in overbought zone. Reversal signs would be exhibited if RSI moves down from the overbought zone of 70.
If it remains above 70, it can continue to move up. The five-day Stochastic is above 70 and it needs to crack below 70 in order to confirm any kind of reversal of the prevailing uptrend.
From the trader's angle, the strategy should be to ride the run till the Sensex does not violate four days or two days low. Investors could look at the Sensex level of 7274 and 7450 to book profits as and when the opportunity arises.
In short, if the prevailing trend continues against all odds then expect the Sensex to attain 7274 at least and to an outer extent of 7450. If it fails to sustain at current levels and cracks 7070 then expect a correction down to the 10-day average and the lower channel value which are placed at 6950-6900 range. This range is moving up by 20 points with each passing day.
Hemen Kapadia
Technical analyst, Morpheus Inc
The Sensex has reflected strength to post a fresh all-time high with consummate ease and still doesn't seem to be in a mood to stop. There are no known resistance levels but significantly strong support comes in at the 6954 level and the 6696 levels. Needless to say, the sanctity of these levels has to be maintained if the Sensex is expected to continue its uptrend.
It is abundantly clear that the Sensex's rally from a low of 4227.50 in May 2004 is very much alive and kicking and even the bigger rally from a low of 2828.48 in October 2002 continues till now.
Weekly mechanical indicators like MACD, RMI, ROC, RSI and Stochastic are all in buy mode but the negative divergence which has been prevalent for the last two years has still not gone away, indicating that a correction of a greater degree could be lurking round the corner at the end of the bull run.
We seem to be located at an advanced stage of the ongoing uptrend while in Elliot Wave parlance, at the 5th Wave of the 3rd Wave. Possible targets for the Sensex over the next five months are 7323, 7532 and 7790.