Indices likely to trade with a positive bias

Market Outlook: • Sensex (14042)/Nifty (4245) LAST week, we had witnessed a triangular breakdown on the daily Sensex charts. The projected target for the pattern was around 12370 (Sensex) /3767 (Nifty) levels. Further on the daily charts, we had witnessed a “lower top lower bottom” formation, which also showed weakness. The indices registered a low of 12558 /3799 levels, which were close to the above-mentioned levels. However, a mix of fresh buying and short covering propped up the market, and indices rose 0.3% on a weekly basis.

Pattern Formation

• On the daily charts, the Sensex & Nifty futures have formed an ‘Island Reversal’ pattern at the bottom, which is a bullish pattern. • On the daily charts, the Sensex has given a close above the gap area (13934-13666 / 4216-4100 levels), which was formed during the downtrend. This suggests further upward momentum in the coming trading sessions. • On the weekly candlestick charts, we are witnessing a ‘Hammer’ formation at the bottom, which is a bullish pattern. • Further, on the weekly charts, we are witnessing a ‘Double Bottom’ formation in process, which is also a bullish formation.

Technical Indicators

On the daily charts, the RSI & Stochastic oscillator have given a positive crossover, which indicates a further rally in the coming week. On the weekly charts, the RSI & Stochastic oscillator are on the verge of giving a positive crossover. Hence, any rally in the coming week will also trigger a positive crossover on the weekly indicators. The latest week has witnessed larger volumes compared to the volumes witnessed in the previous 3-4 weeks. Rising volumes, accompanied with bullish pattern formation should ensure positive momentum in the coming week.

Indices are likely to trade with a positive bias this week, and head towards 14600-14820 / 4450-4530 levels. Any sustainable move above these levels would take the indices to 15580-15800/4650-4700 levels, which cannot be ruled out. The upward gap area around 13347-13675/4073-4143 level, remains an important support level for the next week. There could be two scenarios unfolding in the coming week : • Indices opening with a Gap-Up: In such a scenario, short-term traders who have gone long at the support levels, should book profits near 14600-14820/4450-4530 levels. • Any initial corrective move from the current levels up to 13500-13330/4085-4031 levels, should be used to go long for a target of 14600-14820/4450-4530 levels.