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Saturday, December 22, 2012

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 21, 2012

BSE Sensex index chart

Last Friday's (Dec 21 '12) 200 points drop on the Sensex chart was interesting because both FIIs and DIIs were net buyers on the day. They have been working at cross purposes since Jun '12 - with FIIs doing most of the buying and DIIs turning out to be net sellers. So, if both were buyers, why did the Sensex fall?

Since retail participation has been negligible during the rally, the logical answer is that both sold stocks that comprise the Sensex and bought non-Sensex stocks. This is another example of why too much dependence on Sensex movements can be detrimental to wealth building. Small investors would be better off concentrating on individual stocks and their price movements.

The index has been consolidating within the long-term resistance zone between 19000 and 19800 for the past three weeks. The bull market remains intact - as can be seen from the three rising EMAs and the pattern of higher tops and higher bottoms.   

The 6 months daily closing chart pattern of Sensex is seeking support from its rising 20 day EMA. Even if the support gets breached, there should be stronger support from the 19000 level, which is the lower edge of the resistance zone and also the previous top in Oct '12.

Daily technical indicators are looking a little weak, but haven't turned bearish yet. MACD is hanging on to its signal line in positive territory. ROC has just slipped into negative territory. RSI has dropped to its 50% level. Slow stochastic has fallen sharply from the edge of its overbought zone but is above its 50% level.

Expect the consolidation within the resistance zone to continue a bit longer.

NSE Nifty 50 index chart

Despite some moderation in inflation and improvement in industrial production, RBI kept the interest rates unchanged. That means economic growth will remain low key for a while. Though metal stocks have shown some movement of late, infrastructure stocks are still struggling to regain their past glory. Consumer-oriented companies may remain investor favourites for some more time.

Gujarat election results turned out as expected with the BJP winning by a wide margin. Congress managed to turn the tables in Himachal - but the stock market seemed to have discounted both results in advance. 

The 6 months daily closing chart pattern of Nifty 50 index is behaving similar to the Sensex chart. The index is consolidating within a long-term resistance zone between 5750 and 5950, and currently seeking support from its 20 day EMA.

Daily technical indicators are looking weak, but are not bearish. MACD is touching its signal line in positive territory. ROC has slipped into negative territory. RSI is resting on its 50% level. Slow stochastic is falling towards its 50% level.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty 50 indices are continuing their consolidations within long-term resistance zones. The consolidations are likely to continue for some more time before likely upward break outs. This is a good time to accumulate fundamentally strong stocks that are still trading at reasonable valuations (like some of the stocks recommended in my paid Monthly Investment newsletter).  


Jasi said...

Sir, your analysis is always a delight to read.
Your charts look a bit different. Which software are you using these days and have you changed it recently?

Thanks so much!

Subhankar said...

Thanks for your comments, Jasi.

I was having some problems accessing chartnexus - so used yahoo finance charts instead.

Subhankar said...
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