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Saturday, December 15, 2012

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 14, 2012

BSE Sensex index chart

The highlight of last week’s trading was a new 52 week high of 19612 touched by the BSE Sensex index chart on Dec 11 ‘12. But it turned out to be a ‘reversal day’ (higher high, lower close) that led to a minor correction.

Note that the index has spent the past two weeks inside the long-term resistance zone between 19000 and 19800. That hasn’t prevented the continuation of a bullish pattern of higher tops and higher bottoms.

The index has been trading within an upward-sloping channel for the past 12 months and has gained 25% from its Dec ‘11 low. While the Sensex is still struggling to cross its long-term resistance zone, several individual stocks have reached all-time highs and outperformed the Sensex.

Sensex_Dec1412

The FIIs remain in ‘buy mode’ while DIIs remain net sellers. Why are the DIIs selling? One reason could be to prepare for buying shares of companies being divested by the government. With the ‘success’ of the NMDC divestment, more PSU share divestments are being lined up to meet the UPA government’s huge fiscal deficit.

Daily technical indicators are bullish, but correcting from overbought conditions. MACD has dropped to touch its rising signal line in positive territory. ROC has crossed below its 10 day MA and resting on the ‘0’ line. RSI is showing signs of falling from its overbought zone. Slow stochastic has slipped down from its overbought zone.

On the downside, Sensex should receive good support from its 20 day EMA and the 19000 level. On the upside, expect resistance from the 19800 level and the top edge of the upward-sloping channel. Some more consolidation/correction is the likely outcome before the Sensex can breach the resistance zone.

NSE Nifty 50 index chart

There are definite signs of recovery in the economy. The IIP number was better than expectations. Inflation showed a downward move but remains above the 5% threshold level of the RBI. Any cut in interest rate may have to wait till Jan 2013.

After getting the FDI in multi-brand retail proposal passed by both houses of parliament, the Finance Minister is getting ready to announce a new set of economic reforms. That should see the UPA government through till the next general election in 2014, and provide a further boost to the bulls.

Nifty_Dec1412

The weekly bar chart pattern of the NSE Nifty 50 index has corrected after briefly breaching the 5950 level. A convincing breach of 5950 should take the index to the upper edge of the upward-sloping channel at 6150, before a meaningful correction takes place.

Weekly technical indicators are bullish, but showing signs of slowing upward momentum. MACD has bounced off its signal line, and both are rising in positive zone. ROC is still positive, but below its falling 10 week MA. RSI and slow stochastic are both inside their overbought zones, but sliding down. Downside support is expected from the 5750 level in case Nifty corrects a bit more.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty 50 indices are still trading within long-term resistance zones. They are likely to spend a little more time within the resistance zones before breaching them. This is a good time to practice your stock picking skills instead of worrying about what is going to happen to the indices. (Many subscribers to my paid monthly investment newsletter have already acquired such skills.)

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