BSE Sensex and NSE Nifty 50 Index Chart Patterns – Oct 22, ‘10

BSE Sensex Index Chart

The BSE Sensex index chart pattern shows the inconclusive struggle between the bulls (FIIs) and bears (DIIs), with the bulls gaining a marginal advantage – a 40 points higher close on a weekly basis.

More importantly, the index bounced up after testing the previous bottom of 19772 (the lower edge of the narrow trading range mentioned last week), and closed above the 20 day EMA.

The technical indicators have weakened further. The MACD is below the signal line and falling in positive territory. The RSI has slipped below the 50% level. The slow stochastic touched the oversold zone before moving up a bit. Another test of the support level may be on the cards.

Though the 20 day EMA has flattened, the 50 day and 200 day EMAs are both rising. The Coal India IPO has been oversubscribed more than 20 times, and the FIIs are still net buyers in the secondary market. Inflation has eased a little. The few Q2 results declared so far have been mixed. On the upside, the previous high of 20855 may provide resistance.

NSE Nifty 50 Index Chart

The volume data in the NSE Nifty 50 index chart adds a different – more bearish – perspective. After crossing the 6000 level, the volumes on down days have been higher than those on up days – which is a sign of distribution.

The previous low of 5932 provided support, but it may not do so the next time. Fortunately for the bulls, the rising 50 day EMA is not too far below the support level. A drop down to the 50 day EMA could provide the bulls with enough motivation to try and push the Nifty to a new high. Expect resistance at the previous top of 6284.

Bottomline? The BSE Sensex and NSE Nifty 50 index chart patterns continue to show technical weakness. There is no signs of a trend change. This is just a corrective phase in a bull market. Stay invested, but be prepared for a sharp correction. The FIIs are likely to start booking some profits before the end of the calendar year.