The markets as expected provided a much needed relief rally, but only after a high volatile trading activity during the expiry week. The Sensex ended with a marginal gain of 0.7 per cent at 26,316, but having recovered from a low of 25,718.
The overall sentiment continued to remain that of cautiousness as the larger economic and political news played out. With the rupee touching record lows and Parliament Winter Session being washed out so far, the markets are likely to remain on tenterhooks for any kind of news flow.
The BSE Sensex is hovering way below its monthly and quarterly charts, and now testing support on the yearly charts. As per the yearly Fibonacci charts, frequent trade below 26,100-odd level opens the door for a dip toward 25,000 and 24,100 in the near term.
The BSE Sensex took support precisely at its weekly S3 (25,715) and
bounced back to give a positive weekly close. Going forward, the BSE index is now likely to target its quarterly weekly S3 (26,600) which it broke during the sell-off.
In case, the BSE index is able to cross and sustain above 26,600, only then we should witness a meaningful pullback towards 27,100-27,300 odd levels.
On the contrary, in case, the BSE index is now able to sustain above 26,600, and trades frequently below 25,925, then one should brace up for a deeper fall towards 24,975-odd levels.
As per the weekly Fibonacci charts, the Sensex next week is likely to seek support around 26,080-26,005-25,930, while on the upside the BSE index can face resistance around 26,555-26,630-26,705.
The NSE Nifty ended above its 10-day moving average for the first time since 10 November 2016. The bias for the NSE index is likely to remain tentatively positive as long as the index sustains above the 8,000-mark.
On the upside, the NSE index may attempt to test its short-term (20-day) moving average which is around 8,300-odd level.
The momentum too seems to be slightly in favour of the bulls, largely due to the strong rally on Friday. The Stochastic Slow and the RSI (Relative Strength Index) have turned marginally positive, while the MACD (Moving Average Convergence Divergence) is also looking to turn favourable.
The Average Directional Index (ADX), however, remains in favour of the bears. Hence, one should remain cautious at higher levels.
(Disclaimer: The views expressed in the article are of the author alone and for information purpose only.)