Saturday, May 10, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – May 09, 2014

After Sensex and Nifty touched all-time highs on Apr 25 ‘14, both indices went into corrective modes over the next 9 trading sessions. It turned out to be well-laid bear traps that were sprung on Friday, May 9 – and how!

Nifty gained almost 200 points and Sensex soared by 650 points. Both indices touched and closed at new lifetime highs. Has the market started celebrating a NaMo victory in advance?

The last round of elections will be held on Monday, May 12 and the first exit polls should start hitting the market the following day. Caution is advised since exit polls have a tendency of being incorrect.

As can be seen from the Sensex and Nifty charts (below), a great time to enter the market was back in Aug ‘13. Hindsight is 20-20, you say? Well, this is what was recommended in a post on Aug 31, ‘13:

“Ignore the gloom and doom mongers: neither is the economy as dismal as in 1991, nor are there any global headwinds like in 2008. Use the weak sentiment to accumulate fundamentally strong stocks with a 2-3 years timeframe.”

BSE Sensex index chart


The daily bar chart pattern of Sensex had slipped below its 20 day EMA during the past few trading sessions but found good support from the 22300 level – which had provided support during the past 5 weeks.

Strong FII buying on Friday, May 9 that exceeded the combined buying on the previous 5 sessions completely overwhelmed the bears and sent them scurrying to cover their shorts.

Daily technical indicators are turning bullish. MACD is below its falling signal line in positive territory but is turning up. ROC has crossed above its falling 10 day MA into positive zone. RSI has moved up sharply towards its overbought zone. Slow stochastic bounced up from the edge of its oversold zone, but is below its 50% level.

Expect volatility to increase during next week. Stay calm and ignore sudden index gyrations.

NSE Nifty 50 index chart


In a mid-week technical update on the Nifty chart, the significance of 6640 as a support level was explained and the following comments were made: “… 6640 level has seen multiple bottoms over the past 5 weeks. A bounce up from here will not be a surprise.”

Though Nifty did bounce up sharply to touch new intra-week and closing highs (closing above 6800 for the first time), volumes remain a concern. Note that volumes were the same as in the previous two trading weeks – which had one less trading session each.

All four weekly technical indicators are in their respective overbought zones. Indicators can remain overbought for long periods, but some consolidation or correction can’t be ruled out.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices have touched new lifetime highs. A majority NDA-led government can propel the indices even higher. However, a fractured mandate can cause a sharp correction. Stay invested with suitable stop-losses, and refrain from making large bets. There will be plenty of opportunities once the dust from the election results settles.


Richa Jain said...

This is such a great resource that you are providing and you give it away for free. I love seeing websites that understand the value of providing a quality resource for free.

Subhankar said...

Thanks for your comments, Richa.

I belong to the old school and believe that knowledge is one resource that increases when shared.