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Saturday, November 16, 2013

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 15, 2013

Bears dominated during another holiday-shortened trading week. Both WPI and CPI inflation moved up - due mainly to rising food prices despite a good monsoon. The IIP number was disappointing. The Rupee slid down.

There were a couple of reasons why Sensex and Nifty managed to find some support by the end of the week. The RBI Governor made some soothing noises that stabilised the Rupee and the stock market. Good Q2 results from Tata Steel and M&M also helped.

Is the correction over, or can both indices fall some more? For answers to those questions, we need to take a closer look at Sensex and Nifty charts below.

BSE Sensex index chart


The daily bar chart pattern of Sensex bounced up after receiving support from its 50 day EMA, but faced resistance from its falling 20 day EMA. A lower weekly close means that bears are still holding the upper hand in the near term.

Daily technical indicators are looking bearish. MACD is positive, but falling rapidly below its signal line. ROC is negative and below its 10 day MA. RSI bounced up from the edge of its oversold zone. Slow stochastic is inside its oversold zone.

FIIs remained net buyers throughout the week, but there were some signs that they were booking profits in index stocks and buying mid-cap stocks. Small investors are wary of the market and pulling out their stock and fund investments at every rise.

Despite all the negative sentiment and index volatility, note that the 200 day EMA has been gradually rising and has gained more than 1500 points in the past 12 months. That is a clear sign of a long-term up trend.

The present correction is an adding opportunity.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty closed lower for the second week in a row, but received good support from its 20 week EMA. While some more correction can not be ruled out, this is not a time to sell off in panic.

Note that the long-term up-trend line (in dark blue) – drawn by connecting the Dec ‘11 and Jun ‘12 lows – is intact, despite three consecutive intra-week breaches in Aug ‘13. The breaches can be ignored because the index did not close below the up-trend line even for a single week.

Weekly technical indicators are bullish, but correcting overbought conditions. MACD is positive and above its signal line, but is not moving up. ROC has dropped from its overbought zone to touch its rising 10 week MA. RSI is just below the edge of its overbought zone. Slow stochastic is about to drop from its overbought zone.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are still in corrective modes after touching life-time highs. Many fundamentally strong mid-cap and small-cap stocks are available at reasonable valuations. The correction can be used to accumulate them gradually.

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