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16800 and 17600 will be the resistance levels to watch out for

Sensex (15760.52): The index moved in line with expectations. A bearish trend prevailed and the anticipated test of the crucial support zone of 15300-15500 materialised during the week. After hitting an intra-day low of 15229 on Thursday, the index posted a sharp recovery on Friday.

As the index has been pushed to oversold levels, there is a fair chance of the Friday’s rally spilling over to next week’s trading as well. The immediate resistance is at 16600-16750; the more significant resistance zone is at 17400-17600.

The index has to clear at least 16800 to indicate that the bulls are in control. A failure to move past this level and a subsequent drop below 15200 would indicate that the downtrend would continue and the index could then drop to 13700-14000.

As the index has held above the crucial support zone, it would be reasonable to expect consolidation or a quick rally in the short-term. It would however be prudent to wait for price action to evolve before taking a call on the directional move from a medium- term perspective.

Investors need to keep an eye on key resistance levels at 16800 and 17600. The behaviour of the index at these levels would provide clues about the longevity of the expected short-term rally. Considering that there are no signs of reversal of the bearish trend in higher time frame charts, a continuation of the downtrend after a brief rally will be the preferred view. Investors need to tread cautiously when the index reaches crucial resistance levels mentioned above.

Nifty (4745.8):A bearish trend prevailed in the index dropped to the support zone at 4450-4600 mentioned in earlier weeks. Though the index could see some consolidation at current levels, there is nothing to suggest that we are out of the woods. The immediate resistance for the index is at 4950-5000 and the major resistance is at 5175-5250.

Unless 5250 is overhauled, it would be reasonable to presume that the index would resume the downtrend after a brief consolidation or a corrective rally. It would be safer to wait for price action over the next few days to provide clues about the next major move from a medium-term perspective. At the moment, investors may hold on to long positions with a stop loss at 4575. Profits in long positions may be taken at 4950-5000 range.

CNX Bank Index (7106): After a temporary breach of the bearish trigger level of 7090, the index recovered ground and closed above this level on Friday.The short-term trend is bullish and a move to 7630-7700 appears likely. A close past 7700 could lead to a rally to 7950-8100.

Considering that frontline banking stocks are at extreme oversold region, the index could see a sharp pull-back to 7700-7750 and could turn weak subsequently. Investors may use interim price weakness to take long positions in banking stocks with a target of 7700.

Key pivotals:
Gas Authority of India Ltd (Rs 422): The stock has been stuck in a trading range in the recent weeks. A move to the upper end of this trading range at Rs 440 appears likely. A close above Rs 440 could lead to a test of the resistance zone at Rs 460-470. Investors may consider long positions on weakness with a stop loss at Rs 407.

Hindustan Unilever (Rs 226.1): The price action in the past few days has not invalidated the bullish view expressed last week. The short-term outlook is bullish and the stock could move to Rs 250-255. The bullish view would be negated on a close below Rs 216. Long positions may be considered with a stop loss at Rs 216.

Axis Bank (Rs 861): As anticipated last week, the stock dropped to the support zone of Rs 740-760 and recovered ground on Friday. Though a short-term consolidation or a rally to Rs 910-920 is possible, investors may reduce exposures or hedge their long positions at key resistance zone of Rs 910-920 followed by Rs 940-950. Unless the stock closes above Rs 965, it would be vulnerable to drop to Rs 650-675.

Stock of the week:
Bank of India (Rs 281): The stock has taken a big knock over the past few weeks. Recent price patterns indicate that possibility of a short-term uptrend. The stock could move to the immediate target-cum-resistance zone of Rs 315-320. A close above Rs 320 could lead to a rally to Rs 335-340. Long positions may be considered with a stop loss at Rs 262 on daily closing basis.

Note: The analysis and views epressed in this column are based on the technical an lysis of historical share price action. There is a risk of loss in trading. Views and targets are arrived at by using the Elliott Wave Theory and Point
& Figure technique.

The author does not have investment exposure in the stocks discussed above. Comments and feedback may be sent to bkrish16@gmail.com