Weekly Technical Analysis - May 16 2010

After a hectic trading week, the markets ended with gains, despite the near 300-point fall in the Sensex on Friday. The BSE benchmark index rallied to a high of 17,389, but closed the week with a gain of 225 points at 16,995.

Among index stocks, Mahindra & Mahindra and Tata Motors rallied 7 per cent each to Rs 523 and Rs 763, respectively. HDFC Bank, DLF, Reliance Infrastructure, Wipro, ICICI Bank and Tata Power were the other major gainers. Cipla and Bharti Airtel tumbled over 8 per cent each to Rs 313 and Rs 264, respectively. Reliance Communications, with a fall of 5.5 per cent, was the other major loser.

The markets’ failure to sustain at higher levels is a sign of concern, and with every passing day it seems the bears are tightening their grip. For the moment, it looks like the bears will continue to have the upper hand as long as the Sensex stays below 17,080

On the downside, the Sensex may revisit its recent low of 16,700, and has an outside chance of dropping all the way to 15,400 in case of extremely negative global factors. Next week, the Sensex is likely to face resistance around 17,220-17,290-17,360 and get support around 16,770-16,700-16,630.

The NSE Nifty moved in a range of 186 points — from a low of 5,027, the index surged to a high of 5,213, but finally settled with a gain of 75 points at 5,094.

The corresponding pivot level for the Nifty is 5,130. It will be advantage bears as long as the index stays below 5,130. Above this, the index may face resistance around 5,185-5,210. On the downside, the index is likely to find support around 5,020-5,000-4,980.

The medium-term (50-days) moving average of the Nifty has now crossed its short-term (20-days) moving average, which suggests bearishness in the sort term and a neutral trend in the medium to long term. The medium-term moving average is 5,219 and the short-term moving average is 5,200.

The momentum indicators, MACD, Directional index and Stochastic slow, are in sell mode. However, the strength of the directional index is below 30 per cent, which suggests the trend is rather weak. Hence, there could be whipsawn movements till we get a clear indication.

via BS