Sensex in lower top formation

Stock Picks

- GUJGAS: Above Rs530 target of Rs550 and Stop loss of Rs520. The stock closed at above the 50 and 200 day moving average

- JAICORPLTD: Above Rs135 with a target of Rs155 and Stop loss of Rs124. The stock closed at above the 50, 100 and 200 day moving average

- POONAWALL: Above Rs331 with a target of Rs360 and Stop loss of Rs315. The stock has showed a trendline break and a volume

(Source: Capital-Via)

Mumbai: In the last week, the benchmark indices witnessed profit booking at higher level. NSE Nifty ends 309 points or 1.73 per cent lower, while BSE Sensex down by 1122 points. Due to tepid global market conditions, temporary overbought situation and ahead of long weekend, traders preferred profit booking at higher levels. In last three trading session, the Sensex corrected nearly 1150 points. Among sectors, profit booking was seen in IT, Metal and Reality stocks whereas Energy stocks outperformed, as a result Nifty Energy index rallied over 2.4 per cent.

Technically, during the week the market broke the last week lowest level and after a long time it succeed to close below 10 day SMA. Further, on daily and intraday charts it is holding lower top formation which is grossly negative. However, after a 2500 points fall from the monthly highest level, currently the index is trading near 20 day SMA.

"We are of the view that, the index consistently witnessing profit booking at higher level, the texture is weak, but high chances of pullback rally are not ruled out if the index stands above 20 day SMA. Above which the Nifty/Sensex could move up to 59,000 or 10 day SMA," says Amol Athawale, deputy vice-president (technical research), Kotak Securities.

Further upside may also continue which could lift the index up to 59,300-59,450. On the flip side, 58,200-58,000 would be the sacrosanct support zone, he said. Below the same, index would retest the level of 57,300-57,000.