The markets lived up to their reputation of the last one year by bouncing back after three successive weeks of losses. In the process, they re-ignited hopes of a further upmove and new highs in the very near future. The only concern here seems to be the weekly momentum and monthly charts.
Barring the listless trade on Friday, the markets had a strong trading session throughout the week. The Sensex re-scaled the 20,000-mark and touched a high of 20,084. Eventually, the index ended with a gain of 4.3 per cent (830 points) at 19,967.
Tata Motors and Jindal Steel were the top gainers among the Sensex 30 stocks, up 13 per cent and 11 per cent, respectively. They were followed by Cipla, Hindalco, SBI, Reliance Communications, ONGC and DLF, up seven-nine per cent. On the other hand, Hero Honda shed 5.5 per cent and ACC was down two per cent.
The Sensex had shed over 2,150 points in the three-week correction and has currently retraced around 50 per cent of the losses at current levels. According to fibonacci calculations, 38 per cent, 50 per cent and 61.8 per cent are said to be of key importance. A 61.8 per cent retracement can take the Sensex to around 20,300.
The NSE Nifty moved in a range of 275 points. The index touched a high of 6,030 and finally ended with a gain of 241 points at 5,993.
The momentum indicators on the daily charts, namely MACD and Stochastic Slow, are in favour of the bulls. However, the Nifty has been pausing at the short-term (20-days) moving average for the last two days, which is now at 6,020. Hence, the Nifty will have to take it out at the earliest for further strength to emerge. Once above the hurdle, the index is likely to target 6,160 this week.
Weekly charts support the bullish bias. The Nifty took support precisely at its short-term (20-weeks) moving average, which is now at 5,802, and bounced back. Going by the weekly chart, it won’t be surprising to see the index re-test its record levels in the near future.
This week, the index is likely to face resistance around 6,100-6,130-6,165 and seek support around 5,890-5,855-5,820.