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Tuesday, October 5, 2010

BSE Sensex and Nifty 50 charts – an update

BSE Sensex Index Chart

Sensex_Oct0510_3m

The BSE Sensex index chart pattern reached the 20000 level after breaking out of a year long consolidation in a slightly upward-sloping channel. A minimum upward target of 20600 was calculated following the break out.

After touching the 20000 mark, the Sensex had 8 sessions of sideways consolidation in a narrow band of about 500 points (between 19772 and 20268). An upward break out from this narrow consolidation band took the index to an intra-day high of 20707 – achieving the minimum upward target.

Today’s (Tue. Oct 5 ‘10) trading pattern is a pullback to the narrow trading band, and is along expected lines. The concern is the failure of the technical indicators to match the new high. The RSI has made a lower top and the MACD and slow stochastic are flat.

In case the pullback turns into a correction, the lower edge of the narrow band at 19772 and the rising 20 day EMA should provide support. If the Sensex bounces back up, the next target is the all-time high of 21207.

Nifty 50 Index Chart

Nifty_Oct0510_3m

The Nifty 50 index chart pattern is looking very similar to the Sensex. Here, the break out from the year-long consolidation channel had a minimum upward target of 6150. Before getting there, the Nifty consolidated in a narrow sideways band of about 140 points (between 5932 and 6073) for 8 days.

The index touched an intra-day high of 6222 – achieving the minimum upward target. Today’s trading was an expected pull back to the narrow trading band.

Negative divergences in the technical indicators could lead to a correction, which should get support from the lower end of the trading band at 5932 and the rising 20 day EMA. On an upward bounce, the next target for the Nifty 50 index will be the all-time high of 6357.

The FIIs continue to be net buyers. Net selling by the DIIs counter-balanced the FII buying. It almost seems like a game of ‘dare’ is going on between the two – to see who blinks first. 

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