200-day averages may be tested: Vasudeo

Technical Analyst, Hitendra Vasudeo:

Last week, the Sensex opened at 16086.75, attained a low at 16037.60 and moved up to 16788.48 before it finally closed the week at 16739.01 and thereby showed a net rise of 584 points on a week-to-week basis.

Resistance will be in the 16846-17003 range while support will emerge at 16521-16254-16037 levels.

The lower top is at 17005 and the 200-day averages are placed at 17096 (200-day EMA) and 17384 (200-day SMA).

The rise may get extended towards 200-day averages above 17003. A fall and close below 16000 may terminate the pullback and the downside momentum may resume again.

If the fall from 21108 to 15135 is one leg of the fall, then the pullback retracement levels of the same fall are placed at 17446, 18085 and 18791. These are 38.2%, 50% and 61.8% retracement levels of the fall. The 23.6% retracement of the same fall is placed at 16539, which was crossed on a weekly closing basis with a weekly positive candle. This suggests that a pullback towards 17446 may be witnessed.

MACD on the weekly chart shows a positive divergence whereas other indicators had hit the oversold zone in the last couple of months. Indicators have now started moving higher on the weekly charts. The 50-week average is at 17521.

The broad objective may be to test the 200-day EMA and SMA, which are placed at 17096 and 17384 respectively.

Exhaustion of the current rise may be seen anywhere between 17096-17348-17446-17521.

Conclusion

Continuation of the rise may be witnessed above 17003 and weakness may be seen below 16000.

Strategy for the week

Hold long positions with a stop loss of 16000. Weaker opening at 16521-16254 can be used for buying with a stop loss of 16000. Expect 16846-17003-17756 to be tested. If the higher range is attained first and then 16521 then avoid buying. Sell on fall below 16000 with high of the day as stop loss or 17005, whichever is higher.