Book profits at higher range: Hitendra Vasudeo

Technical Analyst, Hitendra Vasudeo:

Last week, the Sensex opened at 20132.83, attained a high at 20163.38 and fell to a low of 19884.19 but recovered on Friday to close at 20103.52 and thereby showed a net rise of 64 points on a week-to-week basis.
On the weekly chart, A spinning top occurred (a spinning top is a candle with a small real body).  The Spinning top identifies a session in which there is little price action as defined by the difference between the open and the close.  During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble. As a result of the spinning top, the low becomes important henceforth to maintain the uptrend with momentum.
A long lower shadow occurred.  This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold). The long lower shadow is an over bought zone and lower shadow at the higher range can only indicate trading higher bottom.  A recovery from the weekly buy range mentioned last week was seen.  It looks more like a hanging man; therefore, sustaining above 19800 is essential henceforth.
The buy range mentioned last week was 19951-19776 and the low registered was 19884. Recovery seen at a weekly close can be encouraging provided it sustains above 19800 level in weeks to come.
A further sustained rise and close above 20163 is desired in order to maintain the upside momentum.
Weekly resistance will be at 20216-20495. Weekly support will be at 20050-19937-19800.
The 61.8% projection of the rise 15748 to 19137, from 18255 is placed at 20353. The 88.6% retracement of the fall from 21108 to 15135 is placed at 20444. The next target range can, therefore, be 20353-20444
RSI on the weekly chart is in the overbought zone and the hanging man/spinning top could be an issue if it fails to sustain at a higher range.
The stochastic is already in the overbought zone and wait for a violation of the important support henceforth.
MACD is moving higher above its average suggesting that the trend is likely to continue with volatility. BSE Mid Cap Index
BSE MID CAP was down last week on a week-to-week basis for the second time in the last 3 weeks. A further rally can be seen only above 7400. Till then, overall look to exit mid caps. BSE Small Cap Index
BSE Small cap index nosedived last week on a week-to-week basis. A further rally in small caps will be seen only on a rise and close above 7700. Till then, use the rise in BSE SMALL CAP Index as an opportunity to exit.
Long term underperformance of BSE MID CAP and BSE SMALL CAP indices was visible once again in relation to the NIFTY/SENSEX. Conclusion
A strong negative weekly candle henceforth can create trouble. A weekly close below last week’s low of 19884 can spell trouble for the near-term. As long as the Sensex remains above 19800 and 20200, the uptrend will not have issues apart from the intra-day volatility.
At higher range profit booking should be looked at as SENSEX hits 20300-20500 range. Strategy for the week
Hold long positions with a stop loss of 19800. Use rise to higher range of 20300 for profit booking.