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Saturday, November 21, 2009

BSE Sensex Index Chart Pattern - Nov 20, '09

The technical indicators of the BSE Sensex index chart were looking bullish last week, but the slowing upward momentum near the 17000 level and lower volume on Fri, Nov 13 '09 were concerns that haven't been dissipated.

The BSE Sensex spent the week playing hide and seek with the 17000 level, finishing the first two days above it, the next two days below and then, with a final surge on short-covering on Fri, Nov 20 '09,  ended on 17022 - 173 points (1%) higher for the week. Interestingly, FIIs were net sellers on Friday.

Let us take a look at the 3 months bar chart pattern of the BSE Sensex index to try and figure out where it is headed:-

Sensex_Nov2009

Though the index closed higher for the week, it was more of a sideways consolidation, with the index twice seeking support from the 20 day EMA. Compare the higher volumes during the corrective down move in Oct '09 with the lower volumes during the up move in Nov '09.

The bulls are unable to muster enough volume support (i.e. follow-up buying) to sustain the rally. The previous high of 17493 (made on Oct 17 '09 during 'Diwali muhurat' trading) is the barrier that needs to be crossed convincingly, for the higher-bottom-higher-top bullish pattern to continue.

The technical indicators are looking stronger. The 20 day EMA has started moving away from the 50 day EMA. Both remain well-above the 200 day EMA. The RSI and MFI have moved above their 50% levels. The slow stochastic is well inside the overbought zone. The MACD has moved into positive territory and remains above the signal line.

The bulls seem to have the upper hand. But remember that next week has two important events. The first is the settlement day in the Indian markets. The second is the long Thanksgiving weekend in the US markets. It won't be surprising if the FIIs start their end-of-year profit booking.

Bottomline? The bulls are trying their best to revive the happy times of 2007. But the BSE Sensex index chart pattern is looking a bit exhausted after a prolonged bull rally. Continue to book partial profits.

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