The last week saw the sensex trading in the upper range between 4300 to 4450 for most of the time. Though the movement was relatively narrow, volumes continued to be spectacular to say the least. Especially on Friday, both the BSE as well as the NSE recorded their highest ever volumes. The FIIs turned cautious last week in spite of these high volumes.

The short-term trend continues to be up as the sensex recorded yet another short-term top at 4437 on Friday. In the short term, the sensex is stuck in the range between 4250 – 4450. The successive higher bottoms are giving it an ascending triangle formation. But the caution is still advocated at these levels as the momentum of the rise is slowing down as is indicate by the ROC in the daily chart.

If we expand the picture and look at the rally from the low of 3803, there are many counts that show that this medium term rally can end between 4400 to 4500. So the sideways move that we are witnessing can be the terminal corrective pattern of the rally from 3803. Traditional trend following methods have however not given us any firm reversal signal.

The indices continue to be above their 50-day EMAs and their 200-day EMAs. SO prematurely going short can land one in soup. On the other hand, due to the reasons cited in the previous paragraph, do keep booking profits on long positions and maintain stop loss levels too.

The NASDAQ has turned very weak on Friday and closed at 2470.97. That is below the 61.8% retracement that we have been looking at. So it would be best to avoid increasing your positions in the domestic TMT sector and stand aside for a couple of days. We have to watch where the NASDAQ bottoms now to understand the intermediate term trend.

TODAY’S TRADING DAY

Today’s trading day will set the trend for the medium term. There can be a weak start to the day’s trading. Initial supports for the day will be at 4381, 4357 and then 4291. A fall below 4290 will turn the short-term trend down. Subsequent supports are 4230 and then 4159.

Resistance for the day will exist at 4434, 4470 and then 4537.

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