The Nifty finally went past 5,500, due to fresh buying in IT (information technology) and banking stocks. The index struggled for almost five weeks around this mark before crossing it this week. The Nifty settled with a gain of 79 points at 5,531.
The index seems poised for higher levels in the medium to long term. However, it could face some resistance around 5,580 next week. The bulls will continue to hold the upper hand as long as the index stays above 5,525. On the downside, the index may slip to 5,400.
The 20-day moving average is at 5,443 and the 50-day moving average is at 5,361. The index has closed marginally higher at 5,530 from the higher end of the bollinger band, which is at 5,525. Hence, some profit-taking in the first half of the week is likely.
Further, the MACD has turned positive on both daily and weekly charts. The weekly chart suggests support for the Nifty at 5,265. The RSI is also close to the overbought zones, both on weekly and monthly charts. Also, the momentum indicator, Stochastic Slow, is in a fairly overbought zone both on weekly and monthly charts. Hence, one should be prepared for a meaningful correction in the medium term.
The Sensex moved in a near 500-point range this week. From a low of 17,997, it rallied to a high of 18,475, and settled with a gain of 235 points at 18,402.
Among index stocks, Hindalco and HDFC Bank topped gainers’ list, up seven per cent each at Rs 178 and Rs 2,231, respectively. ITC surged 4.5 per cent. Jindal Steel, Larsen & Toubro, DLF, ACC, Jaiprakash Associates and ICICI Bank were up two-four per cent each. On the other hand, Reliance Communications, Tata Power, SBI and Bharti Airtel were the prominent losers.
According to the fibonacci calculations, the monthly chart indicates support for the Sensex at 18,200 while the quarterly chart indicates resistance around 18,500. The yearly chart indicates resistance around 19,550.
WEEKLY STOCK PICKS::Buy Tata Coffee, Reliance Capital, DLF, JP Associates and Hindalco.
MORE VIEWS: The debate is now whether Nifty breaking above the 5500 level is a break out or bull trap. In any case, the indices were getting jittery at higher levels. The FII inflow has kept the momentum going so far. The main indices scaled to 30-week highs on Thursday pushing along banking and realty stocks. But Friday was a different ball game. Global markets reversed direction following a host of reports which pointed towards a slowdown in the US economy.
Derivatives indicators suggest some added volatility in the coming F&O expiry week. Any sharp reversal could trigger a margin call too. On the other hand, bulls will hope some short covering takes the indices to greater heights for the week. A lot also depends on how the global markets behave. Avoid much leverage and ensure that safety is given more priority for the coming week.
