Short-term pattern in the Sensex is appearing quite weak.
The week ahead: The movement in the index since September 26 appears to be an irregular flat that could be the second wave of the fall from the peak of 27,354. Investors need to watch out for the resistance at 26,700. Inability to break above this level will mean that the index can move lower to 25,987 and then 25,554.
A strong move above 26,898 is needed to make the short-term outlook positive.
Medium-term trend: The medium-term trend in the Sensex is positive. But the index is poised just above a critical support at 26,000. A close below this level will accelerate the downtrend and can pull the index to 25,232 or even lower.
But we stay with the key medium-term trend deciding level at 24,000. Investors with a long-term horizon need not panic as long as the index trades above this level.
It was a down-up-down movement for the Nifty last week. This kind of wavering implies that the index can head lower in the near term.
The week ahead: The Nifty is poised just above the key support at 7,790. A close below this level will confirm the onset of the next leg of the down-move from the 8,180 peak.
The movement in the Nifty since September 26 appears to be an irregular flat that is the B wave. Targets of the next wave downward are 7,766 and 7,639. Traders can go short in rallies with stop loss at 8,030.
The short-term outlook will improve only on a strong move above this level.
Medium-term trend: The medium-term outlook for the Nifty stays positive. A close below 7,800 will place this view under threat.
Key medium-term support is, however, placed at 7,000.