Index outlook. Indices on a strong footing

The domestic bellwether indices started the previous week on a choppy note. IMF downgrading India's growth projection, unnerved the market in the beginning of the week. But, subsequently, positive global cues, coupled with positive domestic macro-data —IIP rose to nine-month high of 4.3 per cent in August and CPI inflation remained steady in September — brought back cheer to investors.

In the truncated Diwali week, investors should tread with caution as profit-booking can emerge at higher levels. The September quarter results announcement can continue to be a key factor to watch out, along with the rupee and crude oil movement.

The Nifty index surged 187.7 points or 1.9 per cent last week, continuing its rally the week before. This up-move helped the index to decisively breach the key psychological resistance level of 10,000. Moreover, the index has conclusively breached its 21 as well as 50-day moving averages and hovers well above them.

Short-term view: The index altered its short-term downtrend last week by emphatically breaking above the crucial trend-deciding zone. It recorded a new high of 10,191.9 on Friday. Currently, the short-term trend is up. The daily relative strength index and the weekly RSI entered the bullish zone from the neutral region, strengthening the uptrend. Likewise, the daily as well as weekly price rate of change indicators featured in the positive territory

The index now tests a key resistance in the 10,130-10,170 band with a positive bias. A close above 10,130 is positive for the index. However, it faces another hurdle nearby at 10,200, where slight profit-taking can be seen. Following a pause at around this level, the index can continue its short-term uptrend and encounter next resistances at 10,300 and 10,400 levels. As long as it trades above the significant short-term base zone between 9,950 and 10,000, the outlook will remain bullish.

Traders with a short-term perspective can buy in dips with a stop-loss at 9,950 levels. Immediate supports are at 10,100 and 10,000. On the other hand, conclusive decline below the vital support level of 9,950 can be a threat to the short-term uptrend. An emphatic fall below this level can drag the index down to 9,850 and 9,750 levels. The index has significant medium-term support pegged in the 9,700-9,750 range.

Medium-term view: The index continues to move sideways in the wide band between 9,700 and 10,130 since early July. It now tests the upper boundary with a positive bias. Strong break above the upper boundary can reinforce the bullish momentum and push the index higher to 10,300; 10,500 and 10,854 levels in the medium term.

Conversely, key medium-term support level is at 9,700 and a decisive plunge below this base can drag the index down to 9,400 and 9,300 levels.

The Bank Nifty was volatile during the initial part of last week, testing its 21 and 50-day moving averages. But, on Friday, the index gained 1.35 per cent, decisively breaking above these averages and near-term resistances at 24,400 and 24,500.

With this rally, it gained 499 points or 2 per cent in the previous week. Moreover, the short-term downtrend is altered. The daily price rate of change indicator entered the positive territory, while the weekly indicator continues to hover in the positive terrain.

The daily RSI is on the brink of entering the bullish zone from the neutral region.

Near-term outlook is bullish for Bank Nifty. Traders with a short-term view can buy with a stop-loss at 24,500 levels. The index can test resistance in the band between 25,000 and 25,200. An emphatic break above this band can take the index higher to 25,500 levels in the medium term.

Inability to break this resistance zone can keep the index moving sideways in the 23,800-25,000 range. Having said that, a strong plunge below the key base level of 24,400 can drag the index down to 24,200 and 24,000 levels. Next key support is pegged at 23,800.

Last week, the Sensex maintained its bullish momentum despite choppiness. It climbed 618 points or 1.94 per cent. After breaching a key barrier at 32,000, it now tests a next one at 32,500 levels. Short-term trend is up. The index trades well above its 21- and 50-day moving averages. The indicators and oscillators in the daily chart have entered the bullish zone, backing the short term uptrend. A strong rally beyond 32,500 can push the index higher to 33,000 and then to 33,500 levels over the short to medium-term, with a minor pause at around 32,700. Significant supports are pegged at 32,000 and 31,800 levels. Strong tumble below 31,800 can pull the index down to 31,500 and then to 31,100 in the short to medium-term.

Last week, the Dow Jones Industrial Average managed to inch up amid volatility. Both the daily and weekly indicators feature in the overbought territory, signifying the possibility of a near-term correction. The index can thus fall to 22,600 and 22,500. Subsequent supports are at 22,400 and 22,300. Vital resistance is placed at 23,000. The Nikkei 225 index saw a strong rally to close at 21,155. Key resistances are at 21,500 and 22,000. Supports are at 21,000 and 20,700 .

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