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Wednesday, January 9, 2013

Nifty and Defty charts: a mid-week update

Nifty chart

Nifty_Jan0913

Last Wednesday, the Nifty had managed to cross the resistance zone between 5750 and 5950. Since then, the index hasn’t made much progress, but has stayed above the resistance zone. The break out above 5950 was not accompanied by a significant increase in volumes – so the possibility that the break out was a ‘false’ one remains.

All three EMAs are moving up and the index is trading above them – which is the sign of a bull market in progress. All four technical indicators had showed negative divergences by failing to touch new highs. The sideways consolidation above the resistance zone was expected – more so because Q3 results are around the corner.

Daily technical indicators are still bullish, but showing signs of weakness. MACD is touching its signal line in positive territory. ROC is barely positive, and has crossed below its 10 day MA. RSI is moving down towards its 50% level. Slow stochastic has dropped down from its overbought zone.

Nifty may slip down inside the resistance zone – specially if Infosys declares below par results.

Defty chart

S&P CNX Defty_Jan0913

The uptrend (marked by the blue uptrend line) and the bull market on the Defty chart (Nifty measured in US Dollars) continues. The 20 day EMA provided good support to the index – just as the 200 day EMA and 50 day EMA had done during Nov ‘12 and Dec ‘12.

Daily technical indicators are showing some bearish signs. MACD has become entangled with its signal line, and moving sideways in positive territory. ROC has dropped to its 10 day MA, and about to cross into negative zone. RSI is resting on its 50% level, and may slip below. Slow stochastic is falling towards its 50% level.

Some more correction or consolidation is likely.

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