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Friday, April 19, 2013

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 18, 2013

BSE Sensex index chart

What a difference a (truncated) week made! Gold’s price crashed. Oil prices slipped further. Rupee strengthened a little. Exports grew. Inflation dropped. Prospects of another interest rate cut by RBI brightened.

All of a sudden, a wave of good news for the stock market turned into a tidal wave of buying and short covering. The Sensex spiked up sharply to cross above all three EMAs into bull territory. The support from the ‘gap’ formed back in Sep ‘12 held.

The worst is over – or so the bulls may be thinking. But is it? What has really changed for the better? Yes, the current account deficit has reduced a bit. The drop in inflation is heartening – but that may be more due to ‘base effect’ than any real drop in prices. The grocery bills of housewives have not reduced.

SENSEX_Apr1813_V1

Technically also, there is not much to cheer about. Not yet, anyway. The down trend that started after the index touched its Jan ‘13 top is intact. The bearish pattern of lower tops and lower bottoms continues. That pattern will break only after Sensex crosses its Mar ‘13 top of 19755.

Daily technical indicators are beginning to look bullish. MACD is rising above its signal line, but remains in negative territory. ROC has moved up to its ‘0’ line, and is poised to enter positive zone. RSI and slow stochastic have both crossed above their 50% levels.

Expect bears to become active in the zone between 19300 and 19800. The Jun ‘13 deadline is looming over several companies – both private sector and PSU - that need to dilute promoter stakes to abide by SEBI rules. A lot of liquidity will get sucked out by the dilutions.

NSE Nifty 50 index chart

Good results declared by HCL Tech and TCS undid some of the damage done to market sentiment by so-so results from Infosys and RIL. Smaller private sector banks like Yes and IndusInd came out with decent numbers. Results from FMCG majors will be analysed keenly. A court order allowing operations at some of the iron ore mines in Karnataka will be positive for steel companies.

NDA leaders are going public with their bickering about who will be the next PM candidate. UPA has started fishing in troubled waters by announcing a handsome financial package for Bihar in an effort to woo the JD(U). Politics is taking precedence over policies.

Nifty_Apr1813

The weekly bar chart pattern of Nifty shows a jump above the 20 week and 50 week EMAs into bull territory by the index. However, overhead resistance from the blue down trend line may push the index lower once again.

Weekly technical indicators are showing signs of turning around, but haven’t turned bullish yet. MACD is well below its signal line, and just about managed to stay in positive territory. ROC has crossed above its 10 week MA, but is still negative. RSI bounced up from the edge of its oversold zone, but is below its 50% level. Slow stochastic is trying to emerge from its oversold zone.

The good news is that the longer-term up trend that started from the Dec ‘11 low – marked by the blue up trend line - continues. A test of the up trend line – currently at 5250 - followed by an upward bounce may open up the next leg of the bull market. A breach of the up trend line will be bearish.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty 50 indices are still continuing in their respective down trends, despite last week’s rally. Hold on to your positions and let the results season unfold. Consensus is building over another down move before the bull market resumes. But markets have a strange way of proving the consensus view wrong.

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