Saturday, February 20, 2010

BSE Sensex Index Chart Pattern - Feb 19, '10

The fight between the bulls and bears for ascendancy is clear from the BSE Sensex index chart pattern. Bulls managed to score some points in last week's round. But the bears managed to score a few points as well.

The index closed above the critical 16000 level all five days of the week. On Wednesday, Feb 17 '10, the Sensex moved above the 20 day EMA for the first time in more than 3 weeks and closed exactly on the short-term moving average.

Just when it looked like the bears were going to get knocked out, they came roaring back and once again pushed the index below the 20 day EMA. The 39 points higher close week-on-week may give the bulls some impetus to fight harder next week.

The monthly settlement on Thursday, followed by the budget on Friday may not generate too much buying support. Let us take a look at the 3 months bar chart pattern of the BSE Sensex index:-


The technical indicators have improved a bit but are still favouring the bears in the near term. Both the 20 day and 50 day EMAs are falling with the short-term moving average below the medium-term one and the index below both. Volumes have been on the lower side.

The 200 day EMA is inching up with the index above it - so the longer-term bull market continues. The slow stochastic, RSI and MFI are all at their 50% levels. The MACD is negative but above the signal line.

Inflation numbers are worrisome and the expected oil and gas price hike have been kept in abeyance. At some point, the RBI and the Finance Ministry will need to bite the bullet and raise interest rates and duties. That could be a trigger for the market to fall some more.

Bottomline? The chart pattern of the BSE Sensex index is showing some indecision by bulls and bears prior to the budget. What should investors do post budget? Any sharp up (or down) moves can be utilised to book profits (or buy value). Otherwise, wait for the dust to settle. 

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