During the week under review, the markets struggled at higher levels, with Nifty making a lower high for the fourth straight week. This indicates there is lack of buying conviction at higher levels. On the other hand, the index has not made a lower low this week as was the case in the previous three weeks, indicating buying support at lower levels.
The Nifty touched a high of 5,907, as against the previous week’s high of 5,913, and then dropped to a low of 5,706. The Nifty eventually ended the week with a loss of 2.3 per cent (135 points) at 5,750. Although, the weekly momentum indicators look tired, there is no clear negative divergence as of now, apart from a lower low seen on the 14-week RSI (Relative Strength Index). This could imply that we continue to trade sideways in the short-to-medium term.
The moving averages are indicating support for the Nifty at 5,673-5,643. As long as the index trades above this level, we could be in with a chance of testing 6,155 on the upper side, which is the higher end of the trading band.
However, a couple of weekly close below 5,643, could take us to the lower end of the trading band, to around 5,190-odd levels.
According to the chart pattern seen on the daily charts, we saw the Nifty falling below the 200-DMA (long-term moving average), however, the index managed to close above it. But, the momentum indicators indicate a negative bias, and re-affirm the conviction that the Nifty may test lower end of the trading band soon. The 14-day RSI on the daily charts has been clearing trending downwards after making a lower high and lower bottom on April 18. The same continues for now, and one can look for the first signs of reversal as and when we see a higher high on the RSI.
The Nifty is currently below its short-term moving average (5,836), which can now act as a resistance. And on the downside, the medium-term (50-days) moving average lies at 5,624, where one can see some support emerging.
The only worrying factor is the Moving Average Convergence Divergence (MACD), the Slow Stochastic and Average Directional Index (ADX) are all indicating further negatives. Hence, a possibility of the downside support of 5,624 cannot be ruled out. If that happens, then we could drift towards the lower end of the weekly trading band around 5,190-odd levels.
The BSE benchmark index, the Sensex, moved in a range of 682 points, from a high of 19,697 the index dropped to a low of 19,015, and finally settled with a loss of 466 points at 19,136.
Among the index 30 stocks DLF slumped nearly 10 per cent to Rs 247 and Jaiprakash Associates plunged 9 per cent to Rs 93. Larsen & Toubro, Reliance Communications, Jindal Steel, Reliance Infrastructure, Reliance Industries, HDFC Bank and Hero Honda were other major losers. On the other hand, ONGC and Sterlite Industries gained 1.5 per cent each.
According to the Fibonacci monthly chart, the Sensex may move in the broad range of 18,620-19,650 this May. The support around 18,620-18,700 seems crucial, as break of the same could trigger a sharper fall to 18,100-odd levels. On the positive front, a break above 19,650 could invite further bullishness, which can help the index flare up over 20,000-odd levels.
