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Saturday, July 28, 2012

BSE Sensex and NSE Nifty 50 index chart patterns – Jul 27, 2012

BSE Sensex index chart

Sensex had a lower weekly close for the third straight week. The 20 week EMA failed to cross above the 50 week EMA and the index is trading below both EMAs. A test of support from the blue up trend line connecting the Dec ‘11 and Jun ‘12 lows appears imminent. A drop below the trend line will give bears total control. An upward bounce with volume support will give bulls some hope.

FIIs turned net sellers for a couple of days, before resuming their buying on the last day of the week. DIIs played counterpoint by buying when FIIs were selling, and selling when FIIs were buying. The big boys are playing some kind of a game which is difficult to understand. FMCG stocks are continuing to shine, which means the bear market is not over yet.

PSU banks are hiding deep and dark NPA secrets. Scant monsoon is threatening a drought situation. The only cheery thing happening is the Olympic Games. Even that is unlikely to extricate the UK economy out of a recession.

SENSEX_Jul2712

Weekly technical indicators are turning bearish. MACD is barely above its signal line, and about to drop into negative territory. ROC is above its 10 week MA, but has started to move down. After a few weeks of struggle, RSI failed to overcome the resistance from its 50% level. Slow stochastic has slipped down from its overbought zone.

Sensex is in a bear market, and likely to seek lower levels.

NSE Nifty 50 index chart

A new president has been elected. Sharad Pawar has been mollified. It is time for some ground-breaking reform announcements, right? Don’t bet on it. There is too much in-fighting among the UPA allies – who are more interested in muscle-flexing than taking policy decisions that will help the economy back on a growth path.

Rate cut hopes are fading. India Inc is postponing capex plans. FDI is slowing down. So are exports. Rupee is depreciating against the US Dollar. Inflation refuses to moderate. Well-known companies are being investigated for fraud and tax evasion. Everything that can possibly go wrong is going wrong.

Nifty_Jul2712

Technicals are reflecting the fundamentals. The daily bar chart pattern of the NSE Nifty 50 index is trading below all three EMAs, which have moved very close to each other. A sharp move usually follows. The only way for the move to be upwards is if FIIs start buying in huge volumes. Possible, but unlikely. So, brace yourself for a sharp down move at any time.

Technical indictors are bearish. MACD is falling below its signal line, and entered negative territory. ROC is negative, but has moved up to touch its falling 10 day MA. RSI has emerged from its oversold zone. Slow stochastic is inside its oversold zone.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty 50 indices are falling back into bear markets, after brief forays into bull territory. The time isn’t ripe for bottom fishing. Stick to regular investments in quality stocks and funds. If in doubt, stay out and preserve cash.

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