The major indices are likely to open strong on Monday due to extremely positive cues from the US markets. Market internals suggest selling bias at higher levels. While the indices managed to hold crucial support levels, an impending correction may see the indices break below the support levels in the coming days.
The rally has now been 5-weeks old, and the benchmark BSE index, the Sensex, has gained nearly 13 per cent (1,714 points) during the period. The index moved in a range of 919 points last week – it rallied from a low of 14,504 to a high of 15,423 - and finally ended with gains of 511 points at 15,168.
Among the Sensex stocks, Maruti zoomed over 21 per cent. HDFC Bank, ICICI Bank, Tata Motors, Grasim, Mahindra & Mahindra and ACC rallied 9-16 per cent each. Tata Power and Tata Steel, however, dropped 5 per cent and 4 per cent respectively.
The Sensex crossed the resistance level of 15,200 in intra-day trades during the last three days. However, the index could not close above it. The index may target 17,150 in the medium-term. But a sharp correction is not ruled out, given the high 14-day relative strength index (RSI) at 72 per cent. An RSI of above 70 per cent indicates overbought zone.
The index may face resistance around 15,625-15,740 this week, above which it may spurt to the 16,000-mark. On the downside, the index may seek support around 14,600 and 13,350-13,500.
The Nifty moved in a range of 253 points - rallying from a low of 4,363 to a high of 4,616 - before settling 116 points higher at 4,530.
The index has closed above the 4,500-mark for the last four straight days and looks set to target its 200-DMA (daily moving average) at 5,135 in the coming days.
However, it is likely to face resistance around 4,700-4,800 in the near term, and profit-taking at these levels could see the index slide to 4,170-4,050.
The Nifty is likely to face resistance around 4,625-4,690 and may find support around 4,430-4,370 this week.
