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Wednesday, July 27, 2011

Stock Index Chart Patterns - BSE Sectoral Indices, Jul 27, '11

During the two months since the previous analysis of the BSE Sectoral Indices chart patterns, both the Sensex and the Nifty have struggled in down trends – failing to move above their down trend lines but not falling below their Feb ‘11 and Jun ‘11 lows.

What is happening in the Sectoral Indices? The separation of the wheat from the chaff is becoming more obvious.

BSE Auto Index

BSE Auto Index

Like the Sensex, the BSE Auto index is forming a large descending triangle – lower tops and a flat bottom at 8115 – that has bearish implications. The technical indicators are looking bearish and another test of the 8115 level seems likely. Hold.

BSE Bankex

BSE BANKEX

The BSE Bankex is forming a pennant pattern – lower tops and higher bottoms – which is a continuation pattern. An upward break out is more likely. But the bearish technical indicators are pointing to another spell below the 200 day EMA. Hold.

BSE Capital Goods Index

BSE Capital Goods Index

The BSE Capital Goods index made a valiant effort to escape the clutches of the bear, and managed to spend several days above the 200 day EMA. But bullish hopes were belied. The index has dropped back into a bear market. The weak technical indicators are suggesting that the correction will continue. Avoid.

BSE Consumer Durables Index

BSE Consumer Durables Index

The BSE Consumer Durables index is in a bull market, receiving good support from its rising 50 day EMA. A test of the Nov ‘10 top is on the cards. Hold.

BSE FMCG Index

BSE FMCG Index

The BSE FMCG sector continues to be the star performer over the past year, touching new highs on a monthly basis. Add on dips.

BSE Healthcare Index

BSE Healthcare Index

The BSE Healthcare index has been in a rising trend since the low of Feb ‘11, and is in a bull market. Add on dips.

BSE IT Index

BSE IT Index

The BSE IT index has slipped into a bear market. The failure of the index to get anywhere close to its down trend line in July ‘11 is bearish. Weaknesses in the Eurozone and US economies are taking a toll on our export-oriented software services companies. Hold.

BSE Metal Index

BSE Metal Index

The BSE Metal index is in a bear market. The technical indicators are suggesting further weakness. Unless infrastructure projects start picking up – which seems unlikely in a high-interest regime – things are not going to improve any time soon. Avoid.

BSE Oil & Gas Index

BSE Oil & Gas Index

The BSE Oil & Gas index is sliding down a slippery slope with very little hope of a turnaround. The government is in the horns of a dilemma about fuel prices. Not raising prices means losses and subsidies. Raising prices means stoking inflation. The poor performance of a heavyweight like Reliance has compounded the problems. The technical indicators are turning bearish. Avoid.

BSE Power Index

BSE Power Index

The BSE Power index is in a bear market, though the downward momentum is slowing. The technical indicators are bearish. Avoid.

BSE Realty Index

BSE Realty Index

The BSE Realty index is also a clear avoid – falling in a bear market with little hope of revival in the near term.

The FMCG index, Consumer Durables index and the Healthcare index are in bull markets. The Auto index and Bankex are struggling to remain in bull markets. These are the five sectors that investors should look to for parking their money. Individual stocks in the other six sectors that are going against the grain can also be considered for investments.

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