The Sensex not only rallied beyond 9200 last week, it also moved above the medium-term trend line joining the November 2008 and January 2009 peaks. We had expected the rally to get arrested at this trend-line that is currently poised at 9800. The index has also closed well above its 21 and 50-day moving averages.
It would be best to stay with the first count and be alert in the band between 10000 and 11000 to watch out for sudden price reversals. We will revert to the second count on a strong move beyond 11000.
Investors ought to tread a little carefully in the week ahead as the prices are overstretched and ripe for correction. The magnitude of this correction will give us clues about the intermediate-term direction in the index.
Supports for the week would be at 9663, 9368 and 8867. Fresh trading longs should be avoided on a decline below the first support. Resistances for the week would be at 10469 or 10603. Rally beyond 10600 will take the Sensex to 10945.
Text & Images: Business Line