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Saturday, February 15, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Feb 14, 2014

Lower food prices caused a percentage point drop in both WPI and CPI inflation to multi-month lows. RBI may be inclined to keep interest rates unchanged though GDP growth remains below 5%. Once food prices start increasing again during the summer months, inflation is likely to creep up again.

A few large corporates announced good Q3 results during the week. SBI and DLF were not among them. Expectedly, smaller companies are bearing the brunt of the economic slowdown. Signs of pick up in growth in Germany and France were cheered by global markets.

FII and DIIs were net sellers during the week – but the amounts were small. Sensex and Nifty are now into the 5th month of rectangular sideways consolidations – seeking support from the lower edges of their respective rectangles. Will the supports hold? Let us look at the charts below.

BSE Sensex index chart


The weak rally on the daily bar chart pattern of Sensex faced resistance from its falling 20 day EMA and dropped to the lower edge of the rectangle – where it also received support from its 200 day EMA. That is the good news.

The bad news is that FIIs are still selling, though they were net buyers on Wed. and Thurs. If they continue to sell, the 200 day EMA will be breached. Investor sentiment continues to be negative, and the index is facing sharp intra-day volatility.

Daily technical indicators are in bearish zones, but showing signs of correcting oversold conditions. MACD is deep inside negative territory and moving sideways below its falling signal line. ROC is also moving sideways in negative zone, but is above its 10 day MA and trying to enter positive territory. RSI has emerged from its oversold zone after 8 trading sessions. Slow stochastic is attempting to move up towards its 50% level.

Add or hold on to existing portfolios, but maintain stop-losses in case bears renew their selling.

NSE Nifty 50 index chart


The weekly bar of Nifty stayed between its two weekly EMAs – facing resistance from the 20 week EMA and getting good support from the 50 week EMA and the lower edge of the rectangle within which the index has been consolidating for more than 4 months.

The long-term up trend line (in blue) is rising, with the index trading above it. Despite all the scams, poor governance, high inflation, low growth, poor investor sentiment, the index is in a long-term bull market. Remember the old saying: Bull markets ‘climb a wall of worries’.

Weekly technical indicators are looking bearish. MACD is falling below its signal line in positive territory. ROC is below its 10 week MA in negative zone and moving down towards its oversold zone. RSI is below its 50% level, but trying to turn up. Slow stochastic is about to enter its oversold zone.

A drop towards the blue up-trend line – currently at about 5800 – is a possibility. Bulls are likely to defend the lower edge of the rectangle (at 5970).

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are trading within ‘rectangle’ consolidation patterns. Both indices are in long-term bull markets. Dips are opportunities to add fundamentally strong stocks to your portfolios. But maintain suitable stop-losses in case more selling pressure emerges.

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