Short-term trend turns negative

Last Updated: Sun, May 26, 2013 06:36 hrs

After registering a fresh two-and-a-half-year high early last week, the markets cracked. The Sensex scaled to a high of 20,444. However, as the week progressed, it began to slide, amid profit-taking and negative cues from select foreign markets. The BSE benchmark index tumbled to a low of 19,568 on Friday, a whopping 875-point fall from the week's high.

It ended the week with at 19,704, a loss of 2.9 per cent (582 points). In the process, the index snapped a five-week surge (a rise of 11.2 per cent).

Among the Sensex 30 stocks, State Bank of India (SBI) and Larsen & Toubro fell about 10 per cent each, following disappointment over their earnings in the quarter ended March. SBI plunged to Rs 2,151, while Larsen & Toubro dropped to Rs 1,457. NTPC, Jindal Steel, Reliance, Bharti Airtel and Tata Motors were the other major losers. Coal India, which rose about four per cent to Rs 310, was the sole prominent gainer.

According to the monthly Fibonacci charts, the Sensex retraced sharply, after briefly crossing the monthly R3 (20,420). The index has bounced back a wee bit from its weekly low. Now, it is likely to meet stiff resistance at its monthly R1 (20,070). The monthly and, more importantly, quarterly support of 19,460 would be crucial for the markets in the near term. As long as the BSE index is able to sustain at more than 19,460, we could see some consolidation in the markets. However, failure to sustain at more than 19,460 would trigger a sharp fall in the coming weeks.

Next week, the Sensex is likely to move in the range of 19,160 and 20,250, with support expected at 19,265-19,370 and resistance at 20,040-20,140.

The National Stock Exchange (NSE) Nifty moved in a range of 293 points. From an early-week high of 6,229, the index slumped to 5,937, ending at 5,984, a significant loss of 204 points.

The short-term trend of the Nifty has now turned negative. Any up-move from current levels is likely to be met with strong resistance at 6,100-6,130 levels.

On the downside, the index would have near support at about 5,880 and 5,845---the 50-WMA (weekly moving average) and 50-DMA (daily moving average), respectively. However, break and close below 5,880 could led to further hurdles for the markets, with a slide to 5,700-odd levels in the next few weeks.

Key momentum oscillators on the daily charts have turned negative. However, these remain positive on the weekly charts. Therefore, this week, we may see a strong fight between the bulls and the bears.

To sum up, the short-term trend for the Nifty has turned negative and would be bearish, as long as the index remains below 6,130. On the downside, it could slide to 5,880 and 5,845-odd levels. The key level for the Sensex is 20,070 on the upside and 19,460 on the downside.

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