Sunday, September 21, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Sep 19, 2014

FIIs turned bears during the week. DIIs took up the slack and turned bulls. Money is pouring into equity mutual funds – over Rs 5000 Crores were added during Aug ‘14 – in a typical sign of late entry by retail investors.

The much-hyped visit of the Chinese President, including the announcement of an investment of $20 Billion over 5 years and development of mutual trust to resolve lingering border issues, sent the stock market soaring on Thu. Sep 18 ‘14.

Japan’s promise of investing $35 Billion means Modi’s ‘look East’ policy is beginning to bear fruit. Both countries can help improve and expand our manufacturing capabilities. We can provide them our expertise in IT services – a win-win situation that will boost business and cooperation in the APAC region.

BSE Sensex index chart


The daily bar chart pattern of Sensex failed to move above its Sep 8 top, but closed marginally higher for the week at 27090 – a new high on a weekly closing basis. The index is back above its three EMAs and the post-election up trend line (marked UL3) in bull territory.

Note that the index received support from the 26500 level, which had acted as a resistance during Aug ‘14 – proving once again that exact price levels (such as trend lines and support/resistance levels) are more reliable than calculated levels (such as EMA and Fibonacci retracement).

Daily technical indicators are showing signs of bullishness after correcting overbought conditions. MACD has started to move up towards its falling signal line in positive zone. ROC has crept back into positive territory but remains below its falling 10 day MA. RSI bounced up from its 50% level, but is slipping down. Slow stochastic has climbed above its 50% level.

Expect the index to conquer new highs soon.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty touched a new weekly closing high – its 6th straight higher weekly close. The post-election up trend line (marked UL3) was not even tested during the correction from the previous week’s top.

Volumes have started rising during the past 6 weeks, which will help to sustain the bull rally. Nifty is trading above its two weekly EMAs and both the longer and shorter time trend lines in a long-term bull market.

Weekly technical indicators continue to look overbought. Negative divergences visible on all four indicators – which failed to touch new highs with the index in the previous week week – led to a small 3% correction.

The index is ready to climb to higher levels.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices touched new lifetime weekly closing highs last week. Small intermittent corrections have kept charts of both indices technically ‘healthy’. Stay invested. Avoid the urge to ‘do something’. Patiently holding existing portfolios of good stocks can provide large gains in this bull market.

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