Indices soared to new highs, boosted by positive earnings and macro economic data in the early part of the week. However, global equity markets sold off in the latter part of the week on concerns that the Trump administration could be at risk of collapsing due to the ongoing controversy. Indian equity markets too came off their highs, despite market participants giving a thumbs up to the GST rates announced on Thursday and Friday.

Rising crude oil price which has surged 6 per cent last week to close at $50.67 a barrel and global political risk can keep Asian and domestic markets on the edge this week. Investors should also tread with caution as the May month derivatives expire this week; short covering can keep the indices volatile.

Nifty 50 (9,427.9)

Last week, the index rallied and recorded a new high of 9,532.6. However, after witnessing selling pressure, the index gave away its intra-week gains and fell. It finally closed with a marginal gain of 27 points or 0.3 per cent.

Short-term trend: The Nifty 50 currently tests a key support at 9,400 levels. The 21-day moving average is poised at 9,345 levels. The indicators and oscillator in the daily chart continue to show signs of weakness and are charting downwards.

The daily relative strength index is on the brink of entering the neutral region from the bullish zone. The weekly RSI is hovering in the overbought territory, implying a corrective decline on the cards.

The daily as well as weekly price rate of change indicators are charting downwards and are also showing negative divergence, indicating a potential trend reversal in the offing.

A fall below the immediate support levels of 9,400 and 9,345 can find support at 9,250 levels. We reiterate that the upside could be limited in the near term.

The index could move sideways in a wide range between 9,250 and 9,450 for a while. Strong slump below 9,250 is required to confirm that the index is in a near-term downtrend.

In that scenario, the index can decline to 9,191 and then to 9,075. Investors with a short-term perspective should continue to tread with caution as the upside potential is limited and the index could remain choppy ahead of derivatives expiry.

As the index tests the key resistance level of 9,500, it could face difficulty in surpassing it. Selling pressure could emerge once again at around this level. Hence, investors can book partial profits if the index struggles to rally above 9,500 levels.

Strong fall below 9,075 is needed to alter the short-term uptrend. Then the key supports to watch are at 9,020 and 8,975. Having said that, if the index manages to move above 9,500, it can pave way for an up-move to 9,600.

Medium-term trend: The medium-term uptrend will continue to stay positive as long as the index trades above the significant support level of 8,800.

The Nifty can once again test 9,500 levels in the near term. Strong rally beyond this level is required to push the index higher to 9,600 levels.

Continuation of the uptrend can take the index northwards to 10,037 and 10,854 in the medium term while pausing at 9,700 and 9,800 levels. However, an emphatic fall below 8,800 can drag the index lower to 8,700 and then to 8,650 levels.

Sensex (30,464.9)

Last week, the Sensex advanced 276 points or 0.9 per cent, outperforming the Nifty index. However, it tests a key resistance at 30,500. The daily and weekly indicators and oscillators are showing signs of weakness.

Immediate key support is at 30,000 and the 21-day moving average is also poised at around this level.

Decisive fall below this base can pull the index down to 29,600 and 29,500 in the short term. Traders should desist taking long positions if the index plunges below the key support level of 29,260.

Subsequent supports to watch are pegged at 29,000 and 28,500. Immediate resistances are at 30,700 and 31,000.

Bank Nifty (22,769.8)

After testing the recently-recorded new high of 22,977.8, the index marked a new high of 22,978.1 on Wednesday.

However, the Bank Nifty failed to surpass its previous high and fell to close the week with a marginal gain of 0.4 per cent. The index has been moving sideways in the narrow band between 22,500 and 23,000 since May 4.

The daily relative strength index displays negative divergence, implying the possibility of a short-term trend reversal. Moreover, the weekly RSI features in the overbought territory indicating a corrective decline which could turn into a downward reversal.

We reaffirm that a strong decline below 22,500 can drag the index down to 22,300. Further slump below 22,300 can strengthen the bearish momentum and eventually pull the index lower to 22,000 in the future. In that case, traders with a short-term view can initiate fresh short position on a strong fall below 22,300 with a stop-loss at 22,450 levels.

Strong decline below 22,000 can drag the index down to the 21,800-21,700 band. Subsequent supports are at 21,500 and 21,400.

Conversely, a strong upward break-out of 23,000 can push the index higher to 23,500 in the medium term.

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