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Sunday, September 25, 2011

Stock Index Chart Patterns - BSE Sectoral Indices, Sep 23, '11

The Sensex has been trading within a range for seven weeks, after breaking down below a large descending triangle reversal pattern. That means some sectoral indices are going down; some are going up; and some are going nowhere. The risk takers believe that the ones that are going down are likely to be the ones that will lead the next bull market. The more conservative investors prefer the sectors that can protect the downside better. Let us take a look at how the BSE Sectoral indices are faring.

BSE Auto Index



The BSE Auto index showed remarkable strength by climbing above all three EMAs, only to face strong resistance from the blue down-trend line of the descending triangle pattern. Technically, it is yet to break down below the triangle. But the technical indicators are bearish, and it should break downwards sooner than later. Q2 results unlikely to be great. Avoid.
 
BSE Bankex

The BSE Bankex seems to be tracking the Sensex as it consolidates within a trading range after breaking below the descending triangle. The technical indicators are looking bearish. A test of, and break below, the Aug '11 low is likely. Wait for Q2 results.

BSE Capital Goods Index


The BSE Capital Goods index made a brave effort to climb above the resistance level of 12160, only to face strong resistance from the falling 50 day EMA. A sharp correction has taken the index below its Aug '11 low. Avoid.

BSE Consumer Durables Index


The BSE Consumer Durables index climbed above all three EMAs but couldn't get past the down trend line. The index is consolidating within a large 'pennant' pattern and as long as it trades above its rising 200 day EMA, it will be in a bull market. The weakening technical indicators are hinting at another possible drop below the 200 day EMA. Await Q2 results.

BSE FMCG Index 


The BSE FMCG index, hitherto the best performer among the BSE Sectoral indices, is finally facing selling pressure from the bears. A drop below the 200 day EMA is imminent. The index is poised near the long-term support level of 3800. A break below can take the index down to 3500. Hold. 

BSE Healthcare Index


The BSE Healthcare index is consolidating within a 'pennant' pattern, somewhat similar to the one on the BSE Consumer Durables index chart - but with a big difference. The Healthcare index is trading below its 200 day EMA and the 'death cross' has confirmed a bear market. Considered a defensive sector, it is facing selling pressure due to the perceived slow down in export business from Europe and USA. The bearish technical indicators are pointing to a break below the 'pennant', which could lead to a 400 points drop. Await Q2 results.

BSE IT Index


The slow growth in the Eurozone and US economies has cast a pall of gloom over the BSE IT index - somewhat unfairly perhaps. The rally from the Aug '11 low stalled at the 50 day EMA, and the index is heading downwards again. The breakdown below the downward-sloping channel points to further weakness. Await Q2 results.

BSE Metal Index


The BSE Metal index is likely to test, and possibly break below, the Aug '11 low. The bearish technical indicators are certainly supporting the possibility. Q2 results are unlikely to bring much cheer. Avoid.

BSE Oil & Gas Index


A smart recovery back inside the downward-sloping channel of the BSE Oil & Gas index chart proved to be a temporary respite. The index is about to drop below the channel, in spite of the hike in petrol's price. Artificially lower prices of diesel and kerosene are increasing the subsidy burden, and playing havoc with the burgeoning fiscal deficit. Reliance seems to be under the gun for its financial shenanigans. The bearish technical indicators are suggesting a deeper cut. Avoid. 




BSE Power Index


The BSE Power index is desperately trying to cling on to the lower edge of the year-long downward sloping channel. The sector has redefined Murphy's Law - everything that could possibly go wrong is going wrong. The new land acquisition bill has put paid to some existing projects as well. New projects are unlikely to get off the ground. Shortage of coal is another wild card. Stay away.
 
BSE Realty Index


An attempt by the BSE Realty index to recover lost ground has failed. The biggest players in the sector are in serious financial trouble, but are still not giving up on their strategy of cartelisation to hold on to existing inventory at higher prices. But there are signs of cracks, and efforts to raise cash by selling off land banks acquired at high prices. Avoid.

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