Sensex Chart Pattern - Week ending Mar 20, 2009

In last week's Sensex chart pattern analysis, this is what I had written about the Sensex rally:

How much further upwards can the Sensex go? Since Dec '08, the Sensex had made three attempts to cross the 50 day EMA, and failed all three times. Chances are that it will again get resisted at the 50 day EMA level of around 9100 or so.

Was it clairvoyance? Not at all. Just an observation based on past experience of chart pattern watching. This is what makes technical analysis such an interesting subject - even though fundamental analysts denigrate its importance.

(Readers, and soccer lovers, who would like to learn more about the fundamental analysis vs. technical analysis debate can click on the following link:-

http://investmentsfordummieslikeme.blogspot.com/2008/06/why-michael-ballack-is-good-role-model.html)

Without further ado, let us look at the 6 months Sensex chart:-

(You can right-click on the image above and open it in a new tab or window for a better view.)

Continuing the previous week's rally, the Sensex pierced through the 20 day EMA from below, which was a short term positive. It made valiant efforts to overcome the resistance of the 50 day EMA - but failed.

Despite a close just above the 9000 level on Thursday, Mar 19, '09 the contest between the bulls and bears finished about even-steven, with the Sensex closing below the 9000 mark but about 200 odd points above last week's close. That is the good news.

Now the bad. Through the week, the Sensex remained in between the 20 day and 50 day EMAs. Volumes gradually came down - even on uptick days.

The slow stochastics emerged from the oversold zone but is about to enter the overbought zone (above the '80' line). The RSI also emerged from the oversold zone but stalled at the mid-point. The ROC is marginally above the '0' line. MACD is still a bit negative.

Bottomline? The Sensex continues its consolidation in the rectangular sideways chart pattern, where it has remained for nearly 5 months. But now it is gradually trending down with a lower-top and lower-bottom pattern. So the likelihood of breaking downwards is increasing by the day. Investors should remain patient and keep their cash safe in a bank.