Saturday, January 18, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Jan 17, 2014

The stock market welcomed lower CPI and WPI inflation numbers that were due to falling vegetable prices and a higher ‘base effect’. Inflation rate is calculated in comparison with the previous year’s inflation rate during the same period. The rate of increase was lower, but actual inflation continues to climb.

Q3 results of India Inc. declared last week have been as per expectations. Large IT services companies declared better bottom lines. Margin pressure is still visible. There have not been many positive surprises so far.

Both Nifty and Sensex have been in sideways consolidation modes for the past 3 months. Since both indices are in long-term bull markets, the eventual break outs from the consolidation zones should be upwards. However, it would be prudent to await the break outs.

BSE Sensex index chart


The daily bar chart pattern of Sensex tested the upper edge of the ‘rectangle’ within which it has been trading since the middle of Oct ‘13, but dropped down to seek support from its rising 20 day EMA. Interestingly, both FIIs and DIIs were net buyers during Friday when the Sensex fell.

Daily technical indicators are giving mixed signals – typical during consolidation periods. MACD is positive and above its signal line, but turning down. ROC is also positive and above its 10 day MA, but moving down. RSI has slipped below its 50% level. Slow stochastic is at the edge of its overbought zone.

Note that all three EMAs are gradually moving up, which confirms the underlying bullish bias despite negative sentiment among market participants. Times like these test investor patience.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty 50 closed higher for the week after 2 weeks of correction. The index hasn’t made much upward progress during the past 3 months, but the long term up trend line (in blue) as well as both weekly EMAs continue to rise. The long-term bull market is alive and well.

Weekly technical indicators are in bullish zones but showing signs of weakness. MACD has moved down to touch its signal line just below its overbought zone. ROC has climbed back into positive territory and looks ready to cross above its 10 week MA. Both RSI and Slow stochastic are sliding down towards their respective 50% levels.

The sideways consolidation may continue a bit longer.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are consolidating within ‘rectangle’ patterns. Since both indices are in bull markets, the eventual break outs should be upwards. This is a good opportunity to add fundamentally strong stocks. Enter with strict stop-losses.

(Note: Confused by index moves? Learn how to select fundamentally strong mid-cap and small-cap stocks by becoming a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jan. 21, 2014. Contact me for

No comments: