THE WEEK AHEAD

We had earlier discussed about Technical probabilities of different Sector Indices and BSE IT and BSE PHARMA were two sectors were considered and strong with some initial weakness appearing on charts.

But both these indices proved much stronger and they are in fact responsible for the strength in SENSEX and NIFTY otherwise looking at value erosion in MID CAP ,SMALL CAP , BANKING, PSU AND REALITY STOCKS the SENSEX and NIFTY would have been trading more than 10% lower than their present levels.

Due to the Double Bottom possibilities in SENSEX and NIFTY, there are chances of both of them moving upwards in coming days but as shown in this chart of BSE National Index after a very sharp fall the rise seems corrective only and may be forming a Triangle which is bearish after some sideways movement. So the picture for the broader market is of continued bearishness for the short and medium term future.

 SENSEX

For the third week in a row SENSEX is now trading in a comparatively small range of 1000 points in between 20200-19070. It is entirely possible that overall this range bound movement may continue for one or more weeks but in our opinion the future course will be decided within first two days of the coming week.

There are two reasons for this assumption, first is the overhead resistance zone which is coming nearby around 20000 and the second is the seemingly Double Bottom pattern in SENSEX and NIFTY chart.

Looking at Daily chart for SENSEX 19321 has now become a good and solid support and as mentioned earlier 20001-20056 zone is the major hurdle and for first two days if the rise from lows started on Thursday continues then 19967 will be an important 78.2% retracement level to watch.

All in all in first 2-3 days of the coming week SENSEX will close above 20056 if the Double Bottom pattern has to work and if it faces resistance at the upper zone than it will break 19321 so watches this range for first few days on closing basis.

NIFTY

Last three days highs are at 38.2% Retracement level of the entire fall.Next major 50% level is 6016 and a close above 6028-6088(previous highs) will confirm Double Bottom pattern.

NIFTY has been in a trading range of 5700-6070 and looking at the Weekly charts it will be tough to break the range this week but the DOUBLE BOTTOM pattern can change the probabilities as NIFTY will have a much higher Target once it completes the Double Bottom pattern on the other hand if the resistance levels works and NIFTY closes below 5855 which is Thursdays close we will have a dull and sideway market with clear negative bias.