Sideways volatility to continue: Hitendra Vasudeo

Technical Analyst, Hitendra Vasudeo:

Last week, the BSE Sensex opened at 17347.76 attained a high at 17444.18 and moved down to a low of 17019.24. Finally, the Sensex closed the week at 17134.25 and thereby showed a net fall of 279 points. After the opening of 17347.76 the close was at 17134.25, which means the intra-week fall was of 239 points.

On the indicators front is MFI (Money Flow Index), which was in the overbought zone on the weekly chart when the Sensex made a high of 18523 in February 2012. MFI is falling down and is at 24.69. If it moves down below 20, then an oversold situation on weekly charts may be witnessed. The Stochastic on weekly chart also has yet to move into the oversold zone which is at 49. MACD is above its average and trying to converge over it. The MACD supports the rise and a deeper correction could be seen if the MACD converges over its average to create an oversold condition on oscillators.

The 50% and 61.8% retracement levels are placed at 16828 and 16257 respectively.

The 61.8% projection of the fall from 21108 to 17295 from 18523 is placed at 16167. The 61.8% projection of the fall from 19697 to 15135 from 18523 is placed at 15711.

Immediate support range remains at 17010-16920 and then the retracement level of 16828 and 16267. Further, we have projections at 16127 and 15711.

Resistance will be at 17300-17530. Trading breakout can happen above 17530. If that happens, then expect a rise towards 17664. Further levels will be 17771 and 18206.

Conclusion

Directional movement has not yet been witnessed. Sideways volatility is likely to continue and would put the pressure on supports, retracement and projection levels. Recovery and bounce may come from the lower level discussed above but it cannot be determined which of these points will prove to be the support. For the time being, traders and investors need to keep their fingers crossed and wait for directional movement, which will have to be above 17664 or below 16900.

Strategy for the week

Alternate week opposite movement is being witnessed for the last 4 weeks. Last week was down on a closing basis as well as open to close basis. Objective remains to exit long and sell on rise to 17199-17379 with a stop loss of 17530. Last week was In Week and if it sustains above 17445 then the rise may get extended past 17530. If the Sensex fails to cross 17530 then downside movement could be seen. Buy above 17530 with the low of the day as stop loss or 16900, whichever is lower. Sell on a fall below 16900 with the high of the day as stop loss or 17445, whichever is higher. Since the sideways volatility is seen an indecisive movement is being witnessed.