Trend down despite support: Hitendra Vasudeo

Technical Analyst, Hitendra Vasudeo:

Last week, the BSE Sensex opened at  19365.33, attained a high at  19411.17 and fell to a low of 18793.97 before it finally closed the week at 18918.51 and thereby showed a net fall of 398 points on a week-to-week basis.
In the strategy for the week in the last issue, we had stated that if the opening was above 19100 and then fall below 19100, sell was to be executed. The Sensex opened at 19365 and fell below 19100 to make a low of 18793. Traders who managed to sell the Sensex or CNX Nifty that time had the opportunity to gain. Even if large cap index based stocks were sold, traders would have benefited.
The 38.2% retracement of the rise from 15748 to 20203 is placed at 18508. The higher bottom of the last rally was  at 18266. Expect support at 18508-18266. The trend remains down but short covering from lower levels cannot be ruled out.
Since the trend remains down, an intra-week rise to resistance levels can still be used to sell if attained first. The weekly resistance will be at 19041-19288-19420 while weekly support will be at 18671-18054.
RSI on the weekly chart is falling and the Stochastic is in the oversold zone. Therefore, the range of 18508-18266 may attract buying support unless the fall gets further vertical. Next time whenever the stochastic hits the overbought zone, it will be another opportunity to sell as a lower top against 20203 could be made on account of the pullback. BSE Mid Cap Index
Expect lower range of 6208-6139 to be tested. Reversal can be seen above 6700. Till then, use the rise to exit long position in mid cap stocks. BSE Small Cap Index
The BSE Small Cap index will gradually move down towards 6132 and 5700 in due course of time. Reversal can be seen above 6700. Till then, use the rise to exit long and sell small cap stocks as a broad strategy. Conclusion
Overall weakness is likely to be in place with the possibility of a bounce from the support range of 18508-18266. Strategy for the week
Traders short on the Sensex and index related stocks may keep the stop loss at 19500. Exit long and sell on a rise to 19041-19288 with a stop loss of 19500. Cover short position at 18508-18266. Sell further on a fall below 18200 with the high of the week as stop loss or 18920, whichever is higher.