BSE Sensex and NSE Nifty 50 index chart patterns – Apr 12, 2013

BSE Sensex index chart

Whatever hopes the bulls had of halting the down trend in the Sensex were dashed by the sharp fall in the Infosys stock following its Q4 results announcement. Despite showing improvement in top and bottom lines, muted guidance for the next year hurt sentiments.

With FIIs and DIIs turning net sellers, the index had only one way to go. It closed below the 50 week EMA for the second week in a row. The last time it had done that was back in May ‘12.

All is not lost yet for the bulls. Note the blue up trend line connecting the Dec ‘11 and Jun ‘12 lows. That trend line has not yet been tested. A convincing breach of the trend line – currently at 17000 – may end the bull market.

Weekly technical indicators are quite bearish, though looking a bit oversold. MACD is falling rapidly below its signal line and is poised to enter negative territory. ROC is below its 10 week MA at the edge of its oversold zone. RSI is about to enter its oversold zone. Slow stochastic is already inside its oversold zone.

The correction is likely to continue. With economic growth grinding to a halt, bulls will hope for some positive policy decisions from the government before the elections next year.

NSE Nifty 50 index chart

The men who want to be the next Prime Minister of India (so far, no women have raised their hands) have started jockeying for positions – even though Lok Sabha elections are a year away.

Modi’s oratory have been drawing appreciative audiences at various Chambers of Commerce. May be the UPA leaders will learn a lesson or two that governance and not corruption is the key that unlocks votes.

The down trend in the Nifty chart – marked by blue trend line – continues. Support from the ‘gap’ area (formed back in Sep ‘12, and marked by dotted lines in the Nifty chart) has held so far. Even if the ‘gap’ gets completely filled and the index falls below it, the up move is likely to resume.

However, Nifty has spent seven trading sessions in a row below its 200 day EMA. The 20 day EMA has crossed below the 200 day EMA. The 50 day EMA is falling towards the 200 day EMA. These are bearish signs.

Daily technical indicators are looking bearish, after correcting from oversold conditions. That means the down trend, which has paused at the ‘gap’, is likely to resume.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty 50 indices are continuing in their respective down trends, but it is still too early to call them bear markets. Don’t get paralysed by fear. Money is made by looking for buying opportunities during down trends. But be selective and maintain stop-losses.