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Sunday, November 20, 2011

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 18 ‘11

BSE Sensex index chart


The BSE Sensex weekly bar chart pattern continues to slide within a downward sloping channel. The counter-trend rally during Oct ‘11 failed to move above the 50 week EMA convincingly. The bears used the rally as a selling opportunity. The 15700 level, which had provided good support on three previous occasions, is under threat again. There is a good chance that the index may drop to the lower edge of the downward channel.

The technical indicators are turning bearish. The MACD is still above its signal line, but has started slipping in negative territory. The ROC has dropped sharply into the negative zone, and is touching its 10 week MA. The RSI failed to move above the 50% level, and has started moving down. The slow stochastic is falling towards its 50% level. Any upward bounce from the 15700 level may provide another selling opportunity to the bears.

NSE Nifty 50 index chart


Rising volumes in a week when the Nifty 50 index fell vertically is an ominous sign. Volumes are supposed to taper off during down moves. Bulls may be giving up and heading for the exit doors. The support level of 4700 is likely to be tested and broken soon. In case the index bounces up from 4700, use it as a selling opportunity.

The technical indicators are looking bearish to the point of being oversold. The MACD is well below its signal line, and has entered negative territory. The ROC is negative, and has developed a big gap with its 10 day MA. Both the RSI and the slow stochastic have entered their oversold zones.

Our Finance Minister expressed satisfaction at the weekly drop in food inflation, but the inflation rate still remains very high. Even if interest rates are not raised in Dec ‘11, it is likely to remain at the current high level for a couple of months. The Eurozone debt problems haven’t been solved yet, and the possibility of a double-dip recession can’t be ruled out. Q3 results of India Inc. are likely to be worse than Q2, as top-line growth is getting affected.

Bottomline? The BSE Sensex and the Nifty 50 index chart patterns are trading within downward-sloping channels, and may continue to do so for some more time. At some point, the last of the bulls may capitulate and both indices may face sharp drops below the channels. Instead of waiting for that to happen, one can start accumulating fundamentally strong stocks in a staggered manner, with appropriate stop-losses. Alternatively, wait for the bear market to play out by investing in bank fixed deposits.

1 comment:

niftyexpert said...

The debt reduction talks are breaking down causing more volatility, markets will soon make a new low and reverse.