Last week, the Sensex opened at 16190.79, attained a low at 16147.21 and moved up to a high of 16909.74 before it finally closed the week at 16848.83 and thereby showed a rise of 690 points on a week-to-week basis. We had raised the question last week: Will the pullback survive? It did survive last week but now the issue is: How long?
The Sensex displayed fairly good strength on the recovery and pullback. It went on to test the 75% retracement level of the fall from 17493 to 15330.
On the daily chart, a trend line that was violated on its way down to 15330 is now offering resistance along with the 75% retracement level which is around 16938. On daily charts, immediate support will be at 16605. On a fall below 16600, we could see a correction of the rise from 15330 to the recent high.
Last week's weekly candle was fairly strong. As a result, the Sensex can test the level of 17493 and could get extended to test the 17735 level. A fall and close below last week's low of 16147 will bring in the downside momentum.
It is very likely that the Sensex may spend time between 17493 and 15330 to develop a structure that can ultimately lead to a slide.
In our earlier updates, we had indicated that the inverted head & shoulder looked like a W pattern; the breakout point of this pattern was in the range of 15579-15600. The Sensex did violate the range but has managed to close above it. The bulls could, therefore manage to bring back the neck above the ground. Last week, we saw some kind of a follow-up rise to the recovery week that was witnessed two weeks back.
For the time being, we need to check if the market can sustain in the higher range of 17394 to 17735.
Weekly support will be at 16635-16360- 16147. Weekly resistance will be at 17123-17493- 17735.
Conclusion
A pullback rise was witnessed and it did survive and sustain at the end of the week. A rise to test the recent high could be witnessed whereas a fall and close below last week's low of 16147 could upset the bulls who are on the recovery charge.
Strategy for the week
Exit all long positions on any pull-back rally that is witnessed to resistance levels or above to 17500 and 17745.
Pradip
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