The markets bounced back strongly last week, ending the week with gains in excess of six per cent. The Sensex surged over 1,000 points to settle at 17,805.
Since we are the end of the month, a look at the quarterly and yearly charts indicate that the rally may continue for some time. The Sensex may target 18,100-odd levels in the short-term. Further ahead, the index is likely to face considerable resistance around 18,400-18,500.
By the end of next week, one shall be clearer with the support areas for the index. As of now, Friday's low of 17,671 should be held as the nearest support level. The NSE Nifty moved in a range of 315 points, from a low of 5,085, the index rallied to a high of 5,400. It eventually ended with a gain of 311 points at 5,361.
First, there was a downside gap on the daily charts between 5,230-5,320 that the index had to fill. Now, the Nifty has created a fresh gap around the same levels on the upside. The trading period between August and October now looks like a big 'W', which is disconnected from the entire daily chart. Now, there could be two possibilities. One, if the Nifty manages to sustain above 5,320, then we could see the index try and push itself higher, wherein it could target 5,700-5,800 on the higher side in the next three months.
Two, in case the index starts to trade below 5,320, then it could go to test the support around 5,200-odd levels. As long as it sustains above 5,200, the trend will continue to remain up and the first upside target could be around 5,500. Overall, we are currently in a short-term bullish phase. The 200-day daily moving average of the Nifty is at 5,409. In case the index is able to close above it for three straight sessions, then the bulls are likely to get a further boost.
