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Saturday, April 16, 2011

BSE Sensex and NSE Nifty 50 Index Chart Patterns – Apr 15, ‘11

In a trading week shortened by two holidays, both the BSE Sensex and Nifty 50 index chart patterns consolidated within a range, facing resistance from the downward sloping trend lines and getting support from their rising 20 day EMAs.

I had presented bullish and bearish cases last week. Both sides seem to be holding their grounds. The bears may seem to have the upper hand, as both indices closed lower on a weekly basis. But technically, the 20 day, 50 day and 200 day EMAs are rising, and both indices are trading above their three moving averages. That is the sign of a bull market.

BSE Sensex Index Chart

SENSEX_Apr1511

The up trend from the low of Feb ‘11 took the BSE Sensex index to a lower top, keeping the 5 months long down trend intact. However, all four technical indicators are showing positive divergences. The MACD, ROC and RSI reached higher tops than the ones in Jan ‘11. The slow stochastic made a flat top.

However, the near term indications are bearish. The MACD is well inside positive territory, but has turned around and is about to touch the signal line. The ROC has dropped close to the ‘0’ line – well below its falling 10 day MA. The RSI spent a few days in its overbought zone, but is about to drop down. The slow stochastic has slipped below its over bought zone. Some more consolidation within 19000-19800 can be expected. The 50 day and 200 day EMAs are likely to provide support if 19000 is broken.

Nifty 50 Index Chart

Nifty_Apr1511

The Nifty 50 index chart gyrated to the tune of the FIIs, on alternate days of net selling and net buying. There seems to be no end to the spate of bad news – globally and locally. Japan’s nuclear power plant disaster is going from bad to worse. Production and availability of spare parts in the automobile sector is likely to be affected badly.

European economies are tottering – particularly the weaker ones like Portugal and Ireland. However, inflation in UK seems to be moderating. USA’s jobless growth continues, but inflation is becoming a major concern. Domestic news isn’t much better. Oil price is still above $100 per barrel, worsening the trade deficit. Inflation refuses to come down, which could lead to another interest rate hike soon. The Capital goods and infrastructure sectors are facing tough times. On top of it all, Infosys declared Q4 results that were below consensus estimates, and the stock took a beating that affected both indices.

One would have expected the Nifty to crash under the weight of such negative news. But the index has proved remarkably resilient so far. The consolidation between 5700-5950 may continue. Below 5700, there are likely supports from the 50 day and 200 day EMAs.

Bottomline? The BSE Sensex and NSE Nifty 50 chart patterns are trading within a range. Long-term investors should stay invested with appropriate stop-losses, and await a clear break out from the range to decide the next course of action. Short-term players can trade the range.

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