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Wkly Tech Analysis: Nifty seems on course to 5,450

Rex Cano/Mumbai 19 Aug 12 | 12:50 AM

The Sensex ended higher for the third consecutive week, as foreign institutional investors (FIIs) continued to lend buying support. It touched a high of 17,801, ending the week at 17,691, a gain of 133 points.

So far in August, FIIs have bought stocks worth Rs 5,535 crore, raising their total investment this year to about Rs 56,931 crore.

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Among the Sensex stocks, Reliance and Mahindra & Mahindra rallied about four per cent each. Tata Motors, HDFC, Bharti Airtel and Larsen & Toubro were the other major gainers. Hindalco slumped about seven per cent, and Tata Power, Sun Pharma, ITC, NTPC and Jindal Steel were other prominent losers.

According to the monthly Fibonacci chart, this week, the Sensex crossed the R2 (second resistance level), at 17,752. The index is likely to test 17,875, the R3, on the upside. Once the index sustains above 17,875, we could witness a sharp rally to 18,100-18,500-odd levels. The overall bias is likely to remain positive, as long as the index sustains above 17,460.

The National Stock Exchange Nifty moved in a range of 90-odd points. It touched a low of 5,309, before rallying to a high of 5,400 and settling at 5,366, a gain of 46 points.

The overall bias for the Nifty would continue to remain positive, as long as the index sustains above 5,260. According to daily charts, the near-term support seems to have risen to 5,300-odd levels. On the upside, the index seems to be on course to touch 5,450---the higher end of the Bollinger Band on the weekly charts.

Select momentum oscillators on the daily and the weekly charts indicate conflicting signals. For instance, the moving average convergence/divergence (MACD) and the average directional index (ADX) index seem to be tiring out on the daily charts. The 14-day relative strength index (RSI) and the Stochastic Slow are also in the overbought zone.

The weekly MACD and the ADX index indicate bullishness. The 14-RSI and the Stochastic Slow show positive divergence---higher highs and higher lows. Thus, it can be said any intra-week correction should be a good entry point for fresh longs, based on the indications from weekly momentum oscillators.

The long-term picture indicates sustained trade above 5,450 may lead to a rally up to 5,850-6,000-odd levels in the next couple of months.

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Company Price Gain (%)
ICICI Bank297.551.47
Reliance Inds.1,032.351.22
H D F C1,855.250.47
Tata Motors306.550.31


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