Wednesday, March 20, 2013

Nifty and Defty charts: mid-week technical update

Nifty chart


The 1 year daily bar chart pattern of Nifty is testing support from its rising 200 day EMA for the second time this month. Bulls will hope that the support holds. Bears will attempt to push the index down further to fill the gap in the chart – between 5445 and 5525 - formed back in Sep ‘12. (Though the ‘flash crash’ on Oct 5 ‘12 had filled the gap earlier, it was due to an ‘error trade’ and should be ignored.)

Rising volumes on down days is a concern for bulls, because it is usually a sign that the correction will continue. Daily technical indicators are looking quite bearish. MACD has crossed below its signal line in negative territory. ROC has crossed below its 10 day MA in negative zone. RSI is trying to cling on to its 50% level. Slow stochastic has dropped below its 50% level.

Odds of the index dropping further are increasing by the day.

Defty chart

S&P CNX Defty_Mar2013

The daily bar chart pattern of CNX Defty (Nifty measured in US Dollars) continues to look more bearish than the Nifty. The rising 200 day EMA has been breached for the second time this month.

FIIs are still net buyers, which has prevented the Defty from falling sharply. But the bearish technical indicators are suggesting that the correction is not over.

The gap in the chart – between 3425 and 3490 – formed in Sep ‘12 is likely to get filled. That should be longer-term bullish because the index should resume its up move subsequently.

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