Bang on target! The BSE index, Sensex, touched a low of 13,780 – the exact level mentioned in this column last week. The index, however, witnessed a sharp pull-back from the level, thanks to renewed buying interest in the market.

If the Sensex is able to hold the 13,780 support this week, the index may attempt to scale the 14,650-level, at least in the immediate future, though there may be some resistance around the gap-down level of 14,585.

On the downside, a break of 13,780-level can spell more trouble for the markets with the possibility of the Sensex crashing down to the 11,800-level in the coming months.

The 13,780-level is important for two reasons — other than being the yearly level, the mark is also the 38 per cent re-tracement of the June quarter index swing (of 2,258 points).

Last week, the index began on a positive note but could only manage to touch a high of 15,070 (22 per cent re-tracement of the previous week). Post-Independence Day holiday, the index opened with a huge negative gap (416 points) at 14,585, and just could not recover as the global markets went into a tailspin. The index tumbled to a low of 13,780, and eventually ended with a loss of almost 5 per cent (727 points) at 14,141.

The NSE index, Nifty, swung in a range of nearly 400 points. The index touched a high of 4394 and a low of 4002 before settling with a loss of 5.2 per cent (225 points) at 4108.

The Nifty may drop to 3950-odd levels in case of fresh selling. This week, the index may find support around 3960-3910-3865, while, on the upside, the index is likely to face resistance around 4255-4305-4350.

Another key factor to watch this week will be the Nifty’s trading close to its 200-DMA (daily moving average), which is placed at 4067. So far this year, the index has managed to bounce thrice from the 200-DMA — in the beginning of March, in mid-March and at the start of April. If the index remains below the 200-DMA for a long period (say more than three days), one may see more pain in the future.