Technical Analyst, Hitendra Vasudeo:

Last week, the BSE Sensex opened at 14962.12 attained a high at 15097.87 and fell to a low of 13418.39 before it closed the week at 13504.22 and thereby showed a net fall of 1408 points on a week-to-week basis.

A breakdown below 14016 was witnessed violating the low of June 2009. The low of June 2009 was important as it was the month with the highest ever volume.

The sharp gap up opening on the election results is now being attempted to be covered. The gap created can also be seen on weekly charts. The gap is in the range of 13479-12256. The low registered last week was 13418. The gap will now be tested this week.

As a result of the fall and weekly close below 14016, a correction of the rise from 8047 to 15600 gets confirmed. Confirmation of the head and shoulder pattern has been witnessed.

The retracement levels of the rise from 8047 to 15600 are placed at 12717, 11825 and 10932. In short, a fall and close below 14000 can invite a slide down to 12717-11825-10932 levels.

The Broad Market

BSE Mid Cap Index is likely to test the lower range of 4543-4396. Resistance will be at 4891-5293. Only a rise above 5293 will restore the upside momentum. Any rise to 4891 should be looked as an opportunity to exit long positions irrespective of loss or profit.

BSE Small Cap Index has moved down to 38.2-33.3% retracement already in comparison to BSE Mid Cap Index. On further sustained fall below 5195, expect a slide down towards 4749. Resistance will be at 5451-5956. Any rise to 5451 or above is an opportunity to exit positions in stocks from BSE Small Cap Index irrespective of loss or profit.

Conclusion

Further correction down towards the retracement level is in progress.

Strategy for the week

Exit long positions and sell on rise to the resistance of 14000 or above. Re-enter long positions if a breakout and close above 15100 is witnessed. Overall expectation is that the Sensex could slide down towards 12712.