Despite positive momentum resistance still hangs overhead

By Technical Analyst, Hitendra Vasudeo

Last week, the Sensex opened at 10521.78 attained a low at 10171.91 and moved up to register a weekly high at 10932.12 before it closed the week at 10803.86 and thereby showed a net rise of 455 points on a week-to-week basis.

As expected, the resistance was tested. The level of 10945 also gets tested as the Sensex attained a high of 10932. A breakout and close above 9725 result was a rise towards 10945 and the same has been attained.

We have attained the first retracement level taken from the lower top of 15579 to 8047. The 38.2% retracement level is placed at 10945, which also coincides with the important lower top of 10945 has been attained. On a further sustained rise and close above 11000, the Sensex can extend the rise towards the 50% mark, which is placed at 11700.

Next point in line is another trend line taken from the peak of 21206 and the lower top of 15107 on the log scale. The trend line value is placed at 11500 and is falling daily.

We have to look at the 23.6% retracement of the fall from 21206 to 8047. The 23.6% retracement is placed at 11150.

The 200-day moving average (DMA) will now attract attention. The 200 DMA is the exponential moving average (EMA) and the simple moving average (SMA) is placed at 11190 and 11342 respectively.

A trend line has taken from the low of 7696 and 8064. Further a parallel line is drawn from the peak of 10945 to form a channel. The Sensex is now approaching the channel which is around 11300 which coincides with the 200 day moving averages.

Weekly resistance will be at 11000 and 11860 as per weekly RTS system. Weekly support will be at 10521, 10339 and 10171.

Yearly Outlook for 2009

As per the Yearly levels, Yearly Level 2 will be at 4294 and Yearly Centre Point will be at 12850. The Yearly level 3 will be at 18000.

Conclusion

Resistance still hand overhead as the 200 day average, channel line and long trend line from the peak clusters around 11300-11500 mark.

Strategy for the week

Trading and short-term bias is up with 10171 as the important stop loss and support base for any further rally. Investors, who have been stuck-up with earlier long positions, now have the opportunity to lighten some long positions to get into cash as the Sensex hits the zone of 11300-11500.