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Saturday, December 24, 2011

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 23 ‘11

Technical analysis of the BSE Sensex and NSE Nifty 50 index chart patterns last week posed a challenge as both indices dropped towards the lower edge of their downward channels. Would the indices bounce up or not? The technical indicators on weekly charts looked bearish except for a positive divergence in the ROC.

All four technical indicators in the daily charts showed positive divergences. Plus the Nifty TRIN had spiked up above the 1.2 level, which is usually followed by a bounce. The conclusion was that the likely bounce will be a weak one.

BSE Sensex index chart

SENSEX_Dec2311

The Sensex fell during the first two days of trade last week, and even closed below the downward channel for a day. Two days of upward bounce took the index above the support level of 15700. On Fri. Dec 23 ‘11, the index moved up to face resistance from the falling 20 week EMA and just about managed to close above 15700. A higher weekly close hasn’t changed the technical situation a great deal.

The technical indicators are bearish, but showing faint signs of turning around. The MACD is negative and below its signal line, but trying to move up. The ROC is also negative, but has just crossed above its 10 day MA. The RSI is at the edge of its oversold zone. The slow stochastic has climbed out of its oversold zone.

The odds are still stacked in favour of the bears. The periodic counter-trend rallies have provided them with selling opportunities. A small down trend line within the downward channel has been drawn by connecting the Nov ‘11 and Dec ‘11 tops. The 50 day EMA and the small down trend line are likely resistances for any up move in the last week of a forgettable 2011.

NSE Nifty 50 index chart

Nifty_Dec2311

The weekly bar chart of the Nifty 50 index shows that the 4700 level, which provided support during Aug and Sep ‘11 is now turning into a resistance level. The weekly volume bar shows the same volume as the previous week’s – which doesn’t augur well for sustaining a rally.

The technical indicators are bearish. The MACD is negative and below its signal line. The ROC is negative and below its 10 week MA. The RSI is below its 50% level. The slow stochastic has dipped into its oversold zone. Things aren’t looking very good for the bulls at this stage.

Inflation is showing moderation, but repeated interest rate hikes have put the brakes on economic growth. It will take a while before the growth engine starts chugging along at full steam. Substantial interest rate cuts are required before that. Less than commendable Q3 results next month may trigger off more selling.

Bottomline? The BSE Sensex and the Nifty 50 index chart patterns are still sliding within downward-sloping channels. Breaks below the channels can’t be ruled out. It is disheartening to spread gloom on Christmas Eve – so here is an attempt to spread some good cheer: Next year around this time, the stock market should be in much better shape. (Regular readers of this blog may please stay tuned for a surprise gift on New Year Eve.)

Wishing all readers, followers and subscribers a merry Christmas and a happy 2012.

4 comments:

Jasi said...

For me easily the quote of the year, not just this blog, but across everything I have read throughout the year has been this

"At some stage, Mr Market will get fed up with you (and others like you) and start increasing prices – not in one shot, but gradually. Much like the way he kept offering better discounts with each passing week. That is the best time to start buying. You may not get the absolute lowest bargain price. But you can sleep peacefully at night knowing that henceforth, prices will start rising. "

And I thank you for giving this previous lesson in investing. Season's greetings to you too Sir!

Titu said...

Hello Sir,

Wishing you and All a merry Christmas and a happy 2012.

-titu

LovelyGuy said...

Dear Subhankar, Thanks for superbly written updates and efforts that you have made. Wish you Merry Christmas and a Happy new year.
Spandan

Subhankar said...

Appreciate the feedback and kind words.