The Sensex opened the week at 20501, made a high of 20706, a low of 20145 and closed the week at 20250. The Sensex lost 195 points on a weekly basis. Similarly Nifty opened the week at 6144, made a high of 6223, a low of 6067 and closed the week at 6103. The Nifty too lost around 40 points on a weekly basis.
After making five consecutive white candles, the market has taken a break and as a result both the Sensex and the Nifty have managed to make a small black body candle on the weekly charts, which is a neutral formation. Hence the next weeks candle will be the decisive one. On Friday, as per the daily charts, both the indices have formed a small Star formation, which is a small body black candle. If we take the two candles on Thursday and Friday, then the first half of the morning star pattern is in place. The Morning Star pattern will be completed if we form a white body candle on Monday.
In the immediate term the Sensex has support at 20098 and Nifty at 6008. If the market closes below the above mentioned levels, then we will see a correction of the recent rise i.e. from Sensex 17819 to 20706 and Nifty 5348 to 6223. In that case, the correction levels for the Sensex are at 19603-19263-18922 and Nifty 5889-5786-5682.
Let us consider the Bullish Inverted Head and Shoulders formed on the weekly charts. Sensex fell from 15579 in Aug 08 to 7697 in Oct 08. The target for this fall is at Sensex 23461. Similarly Nifty fell from 4649 in Aug 08 to 2252 in Oct 08 and the target for this fall is at Nifty 7046. The market had given a Rising Channel Breakout and the target for that was Sensex 20627 and Nifty 6180, which has been achieved last week.
In the current upmove both the indices have rebounded from Sensex 19771 and Nifty 5932 and in the process have registered higher bottoms. Sensex has formed higher bottoms at 19771-17819 and Nifty has formed higher bottoms at 5932-5348. The short term uptrend will be in danger only if both the indices close below their higher bottoms i.e. Sensex – 19771 and Nifty – 5932. The long term trend will remain intact as long as Sensex 17819 and Nifty 5348 remains intact.
On the moving averages front, both the indices are well above their 20dma (Sensex – 19975 and Nifty – 6001) and 50dma (Sensex – 18932 and Nifty – 5686) hence the short and medium term trend continue to remain positive.
MACD has just given a Sell signal but continues to remain in positive territory. The Stochastic oscillator is no more in overbought territory and has given a Sell signal as %K has cut the %D line from above. The ROC continues with its Buy signal. The momentum oscillator like the RSI (66) has finally lowered after remaining in overbought territory for almost a month. ADX is at 50, suggesting that the current trend is now maturing. The Directional Indicators +DI and –DI continue with their Buy signal, but have now started moving towards each other. MFI has moved lower at 42, signaling a short term Sell and suggesting some profit booking has occurred at higher levels. At the same time the OBV continues to remain in Buy mode.
The OI PCR is at 1.42 suggests that the bulls still have the upper hand. For the current month, strong build up is seen at the 6000 Put which should act as a near term support. Some Call writing is seen at the strike of 6200 which will provide short term resistance to the market. In short the Nifty is likely to move in between 6000 on the lower side and 6200 on the higher side.
Sensex has Trendline Support at 19989 and Nifty has Trendline Support at 6008.
For the week ahead, Sensex will find Support at 20267-20079-19864 and will find Resistance at 20627-20806-20985.
For the week ahead, Nifty will find Support at 6087-6037-5977 and will find Resistance at 6185-6222-6260.