Technical Analyst, Hitendra Vasudeo:

Last week, the Sensex opened at 14591.28, attained a low at 14016.95 and moved to a high of 14781.94, before finally closing the week at 14764.64 and thereby showed a net rise of 242 points on a week-to-week basis.

Last week, we did see correction down towards 14016.95 and move up thereafter creating an up and down sideways movement during the week and close higher at the end of the week.

Resistance will be at 15237-15600. A breakout and close above 15600 will continue with the rise. In that case, the recent dip down to 14016 will be a part of the continuation move of Wave a itself.

If it fails to sustain at the higher range and does not break below the support of 14016 then, it will be a minor pull-back of the last fall from 15600 to 14016.

The volume during the week when Sensex 15600 was registered was the highest. Therefore, a breakout and close above 15600 is a must for the rally to continue.

On the linear scale weekly chart, the trend line from the low of 8110 and 11621 has been well respected last week to close higher. Therefore, the low registered last week adds strength for a near term rise. A breakdown below the low of last week i.e. 14041 will take a deeper correction of the rise from 8047 to 15600. The correction levels will be placed at 12709, 11817 and 10924. If 14041 is not violated, then looking at lower correction levels does not arise.

Weekly support will be at 14521, 14260 and 14016. Weekly resistance will be at 15025, 15237-15261 and 15600.

In case of a breakout and close above 15600, expect a rise towards 16197, 17980 and 19555. Each of the levels will tested depending on the market momentum.

The Broad Market

The BSE Small Cap’s low last week at 5451 is the support that may prevent a further correction. A pull-back towards 6073-6644 range is possible which can be used to book profits broadly. Small Cap stocks trading moves are likely if the level of 5451 is not violated immediately.

BSE Mid Cap has support at 4787. A rise towards 5278-5409-5542 will be witnessed but it needs to be seen how it sustains. A breakout and close above 5542 will continue the mid cap rally. Last week’s low of 4787 holds the current momentum that began in the second half of Friday, 26 June 2009.

Conclusion

Trading moves are likely. A breakout above the recent highs or 4 weeks high will confirm the continuation of the rally across the board.
Strategy for the week

Traders can trade long but keep a stop loss of last week’s low of 14016 for the Sensex, 5451 for BSE Small Cap Index and 4787 for the BSE Mid Cap Index. A fall below the stop loss level can get into an extended form of correction. A breakout above 15600 for Sensex, 6644 for BSE Small Cap Index and 5542 for BSE Mid Cap Index will add further momentum on the upside. Immediate trading moves can test the breakouts points. During the week, traders need to wait for breakouts and consolidate on the rise from the short-term trading perspective. Traders can look for a rise towards the recent peaks to book profit and exit long positions and re-enter above the breakout points.