BSE Sensex and NSE Nifty 50 index chart patterns – Oct 25, 2013

Q2 results are coming in thick and fast, and one point that is clearly emerging is size matters – specially when the economy is not performing well. The big boys of India Inc. continue to outperform. HDFC, ICICI, Hero Motocorp, ITC, HUL results were better than expectations.

Among smaller players, Idea Cellular, TVS Motors, ING Vysya Bank results surprised positively but cement companies have disappointed. Wipro and Exide results were also below par. All eyes will be on RBI’s policy announcement next week. With inflation refusing to go down, a 25 bps repo rate hike is expected.

BSE and NSE indices touched new 52 week highs on intra-day and intra-week basis before taking a breather. In last week’s analysis, technical indicators had pointed to a period of correction or consolidation – after which new life-time highs are likely.

BSE Sensex index chart

The daily bar chart pattern of Sensex crossed the psychological 21000 level on intra-day basis for the first time in 3 years, but could not sustain above it. All three EMAs are rising and the index is trading above them. The bulls are back on top.

Three of the four daily technical indicators – MACD, RSI, Slow stochastic – are correcting overbought conditions. ROC has crossed below its 10 day MA, and is showing negative divergence by failing to touch a new high with the index.

A few more days of correction/consolidation is likely. The opportunity can be used to add to existing positions.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty touched a new intra-week high but formed a ‘reversal week’ pattern (higher high, lower close) accompanied by strong volumes. That has set the stage for a period of correction or consolidation.

Weekly technical indicators are bullish, but ROC and Slow stochastic are overbought. MACD and RSI are both showing negative divergences by failing to touch new highs with the index.

The 20 week and 50 week EMAs are rising and the index is trading above them, so there is no immediate threat to the long-term bull market. FIIs have remained net buyers, but appear to be shifting focus to the mid-cap segment where better valuations are available.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices again touched new 52 week (and 2 yr) highs, but are facing expected technical headwinds. Stay invested, or add to existing positions.