BSE Sensex and NSE Nifty 50 index chart patterns – Mar 23 ‘12

BSE Sensex index chart

The weekly bar chart pattern of the Sensex shows five straight weeks of losses. That is the bad news. The good news is that the index has closed on or above its 50 week EMA for nine straight weeks. The upper edge of the downward sloping channel is also providing good support to the index.

The Sensex is tantalisingly poised for a break out in either direction – but the odds slightly favour the bulls. The technical indicators are bullish, but showing some weakening signs. The MACD is positive and above its signal line, but the gap between the two is narrowing. The ROC is also positive, but has crossed below its rising 10 week MA. The RSI has entered its overbought zone for the first time since Oct ‘10, and showing positive divergence. The slow stochastic has dropped down from its overbought zone.

The Sensex appears to be consolidating within a falling wedge pattern, which has bullish implications.

NSE Nifty 50 index chart

The daily closing chart of the Nifty appears to be consolidating within a bullish falling wedge pattern from which the break out should be upwards. Volumes have been sliding – which is quite common during consolidation periods.

The technical indicators are looking bearish. The MACD is falling below its signal line, and about to enter negative territory. The ROC has dropped below its 10 day MA into the negative zone. Both the RSI and the slow stochastic are below their 50% levels.

The index can be expected to consolidate some more before it eventually breaks out. FIIs are still net buyers but their buying pressure has slowed down. The DIIs have mostly been selling to keep the index from rising sharply.

Bottomline? Chart patterns of the Sensex and Nifty indices appear to be consolidating within falling wedge patterns. The likely break out – which can happen over the next couple of weeks - should be upwards. This is a good time to enter fundamentally strong large cap stocks. Once the RBI starts to cut interest rates, market sentiments will get a boost.