NIFTY bearish below 5,130

Wkly Tech Analysis: Bias to remain bearish below 5,130

Among the index stocks, Hero MotoCorp slumped almost 10% to Rs 1,981, and Maruti plunged over 8% to Rs 1,283

Rex Cano / Mumbai May 05, 2012, 23:59 IST

The markets, as expected, began the week with hopes of a counter rally by the bulls. We saw the Sensex touch a high of 17,432, but eventually the gains turned into significant losses by the end of the week as technically the momentum oscillators were not supportive.

The Sensex slumped to a low of 16,777 amid heavy losses in auto, banking and capital goods shares. The BSE benchmark eventually ended the week with a loss of 356 points at 16,831.

Among the index stocks, Hero MotoCorp slumped almost 10 per cent to Rs 1,981, and Maruti plunged over 8 per cent to Rs 1,283. BHEL, Tata Steel, State Bank of India, Coal India, Bajaj Auto and Larsen & Toubro were the other major losers. On the other hand, TCS surged over 6 per cent to Rs 1,278. Cipla and Hindustan Unilever were the other prominent gainers, up around 4.5 per cent each.

According to the monthly Fibonacci charts, Sensex has near support around 16,700, a break below which could see the index dip towards the quarterly support level, which is around 16,200. The yearly chart also indicates some support around 16,670-odd levels. On the upside, the Sensex needs to sustain above 16,980.

Next week, the Sensex may seek support around 16,580-16,425, while it may face resistance around 17,080-17,240.

The NSE Nifty moved in a range of over 200 points. The index touched a high of 5,280, and then tumbled to a low of 5,071. The index finally settled with a significant loss of 122 points at 5,209.

The Nifty has broken below its 200-day DMA (daily moving average) on the daily charts after more than three months. The momentum oscillators continue to remain fairly bearish, hence we may see some more losses going ahead.

Select key momentum oscillators like the MACD and Stochastic Slow are both negative, on the daily and weekly charts, hence chances of a further downside are higher.

The near-term bias is likely to be negative as long as Nifty remains below 5,130 — which is the lower end of the Bollinger Band. The nearest support for Nifty is at 5,020, below which we could see fresh weakness with the next major support at 4,835.

On the positive front, if the Nifty is able to sustain above 5,130, then we could see a counter rally all the way up to 5,290-odd levels.

Next week, the Nifty is likely to seek support around 5,005-4,960, while it may face resistance around 5,165-5,215.