Expect weakness below 18,500

Last Updated: Sun, Oct 28, 2012 06:55 hrs

For the second week, markets recorded choppy movement, within a narrow trading range. The Sensex moved in a range of 250-odd points; from a high of 18,813, the index slipped to 18,558, finally settling at 18,625, a loss of 57 points.

Among Sensex stocks, Jindal Steel plunged over five per cent to Rs 386. ITC and State Bank of India fell about four per cent each to Rs 286 and Rs 2,173, respectively. Tata Motors, Hindustan Unilever, Wipro and Infosys were the other major losers. Mahindra & Mahindra soared nearly seven per cent to Rs 880, while Larsen & Toubro surged 4.5 per cent to Rs 1,706. ICICI Bank, TCS and Bajaj Auto were the other prominent gainers.

According to the Fibonacci chart, the Sensex would see support at about 18,525. As long as the index remains at above 18,525, we could see a bounce-back. However, in case the index falls below 18,525, we could see a fall to 18,400-18,150 levels.

The Reserve Bank of India's policy review on October 31 would be the key event in the week. A quick look at the bank Nifty chart shows a negative picture---the Stochastic Slow, both on the daily and the weekly charts, has turned negative. The bank Nifty is likely to face considerable resistance at 11,650-odd levels. The index may, however, see support at about 11,465 (20-day daily moving average). Below this, the index may plunge to 11,275-odd levels.

This week, the NSE Nifty moved in a narrow range of 80-odd points. From a high of 5,722, it dropped to a low of 5,642, finally ending at 5,664, a marginal loss of 20 points.

On the daily charts, the momentum oscillators have turned fairly bearish for the NSE index. The 14-day relative strength index and the Stochastic Slow have shown negative divergence---both on the daily and the weekly charts. However, while the moving average convergence/divergence has shown a negative trend on the daily charts, this is positive on the weekly charts. Overall, the bias is likely to remain negative in the short term, as long as the Nifty sustains below 5,725. Sustained trade below 5,625 may aggravate the fall to 5,535-odd levels.

Next week, the Nifty may seek support at 5,635-5,615, while it may face resistance at 5,695-5,715.

More from Sify: