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The indices have climbed above key hurdles. Signs of short-term volatility are now evident
Indices continued to edge higher
last week. After an initial slide, the Nifty 50 index managed to regain
bullish momentum and breached the resistance level of 9,100. The index
advanced 65 points or 0.72 per cent last week.
The
first quarter of 2017 has been good for equity investors with the Nifty
50 gaining 12 per cent. However, with indices now at record highs, some
edginess could creep in now. The fourth quarter earnings of companies,
Donald Trump’s policies, progress of the monsoon and smooth passage of
GST will determine the direction over the coming quarters.
Investors
will react to the positive auto sales numbers for March, declared on
Saturday. However, the GST debate in the Lok Sabha on Wednesday and the
movement of the rupee can keep the indices volatile.
Asian indices that are currently showing signs of weakness can also keep the domestic markets under pressure.
Nifty 50 (9,173.7)
Nifty regained most of the lost ground last week.
This week:
The index has resumed its short-term uptrend but faces a key resistance
in the 9,200-9,218 range. An emphatic break above this resistance zone
can push the index higher to 9,286 and 9,353 levels. Having said that,
the daily indicators such as price rate of change and moving average
convergence divergence indicators show signs of weakness. Further, the
weekly relative strength index as well as price rate of change are
displaying negative divergence, indicating the possibility of a
short-term trend reversal. Inability to move beyond the key resistance
band between 9,200 and 9,218 can pull the index down to 8,950 and 9,000
support zone. Strong decline below 8,950 will signal the reversal of the
short-term trend. In that case, the index can decline to 8,860 and
8,800 levels.
Therefore, traders with a short-term
perspective should remain cautious. Consider going long only if the
index moves below 9,218 levels.
Medium-term trend:
There is no major change in the medium term. The index has been on a
medium-term uptrend since the last December low of around 7,900. The
uptrend will remain in force if the index manages to stay above the key
support range of 8,950 and 9,000, going forward. Medium-term target is
9,353.
The medium-term uptrend will remain intact as
long as the index trades above the significant support level of 8,500.
An emphatic upmove beyond 9,353 can take the index northwards to 9,500
in the medium term. Key supports below 8,500 are at 8,350 and 8,250.
Sensex (29,620.5)
Last
week, the Sensex strolled above the immediate resistance level of
29,500 by gaining 0.7 per cent. But it has not emphatically breached
this hurdle, which is a key long-term resistance. A strong rally beyond
29,500 is needed to strengthen the bullish momentum and take the index
higher to 30,000 and then to 30,500 in the upcoming months. But failure
to move past this level can drag the index down to 29,350 and then to
29,000 in the short term. The daily as well as weekly indicators show
signs of weakness.
The short-term uptrend will
remain in place as long as the index trades above the immediate support
level of 29,000. An emphatic downward break of 29,000 levels can drag
the index down to 28,740 and 28,500 levels in the short term.
The
medium-term uptrend that has been in place since December will be in
force as long as the index trades above 27,500 which is a key long-term
base level. Subsequent support is at 27,000.
Bank Nifty (21,444.1)
The
Bank Nifty climbed 321 points or 1.5 per cent outperforming the broader
indices in the previous week. However, the index currently tests a key
resistance at 21,500. Failure to decisively move beyond this hurdle can
bring forth selling pressure, resulting in profit-taking. Key immediate
supports are at 21,000 and 20,700. A slump below the second support can
alter the near-term uptrend and pull the index down to 20,500.
Subsequent key supports are placed at 20,370, 20,150 and 20,000.
But
a strong break above 21,500 can push the index higher to 22,000 in the
near future. Traders with a short-term horizon should be watchful as the
index hovers at a vital resistance level. Since the December 2016 low
of 17,606, the index has been on a medium term uptrend. This primary
trend will remain in place as long as the index stays above 19,000
levels.
Global cues
Taking support at 20,500,
the Dow Jones Industrial Average bounced back last week, advancing 66
points to close at 20,663.2. The index now faces resistances ahead at
20,840 and 21,000. A strong rally beyond these hurdles can take the
index higher to 21,170. Nevertheless, if the index plunges below 20,500,
it can go down to the strong support level of 20,000 in the short term.
The
Nikkei 225 index has declined 1.8 per cent last week ago and tests a
vital support in the band between 18,900 and 19,000. A slump below
19,000 can pull the index down to 18,500 in the near term. A rally
beyond 19,250 is needed to bring the bullish momentum back and take the
index higher to 19,500 once again.
The crude oil
price took support at $48 per barrel last week and surged $2.6 or 5 per
cent to close at $50.6. A strong rally beyond $50 can push the commodity
price higher to $52 and $54 level, which are key medium-term hurdles to
note. Supports are at $48 and $47.
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