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Sunday, October 26, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 23, 2014

Profit booking by FIIs after the stock market touched a lifetime high on Sep 8 ‘14 caused a correction that threatened the up trend (marked by UL3 on Sensex and Nifty charts) that followed BJP’s victory in the general elections.

Recent results of state elections in Haryana (BJP majority) and Maharashtra (BJP largest party) will allow BJP to form the government in both states. Bearish sentiment disappeared, and a short pre-Diwali rally ensued. FIIs started buying equity again. DII net buying has almost caught up with FII net selling during Oct ‘14.

Bulls are about to regain control and take both indices to new highs. The Sep 8 ‘14 lifetime high remains a psychological hurdle. There is usually some profit booking near a previous top, but that shouldn’t prevent bulls from charging ahead.

BSE Sensex index chart


A couple of closes below Up trend line 3 (UL3) threatened the Sensex up trend that followed the general election results in May ‘14. But it wasn’t a convincing breach according to the 3% ‘whipsaw’ rule. Note that Sensex bounced up above UL3, and its 20 day and 50 day EMAs, into bull territory – proving that the rule works.

Daily technical indicators are looking bullish. MACD has crossed above its falling signal line, and is about to enter positive territory. ROC has crossed above its 10 day MA to enter positive zone. Both RSI and Slow stochastic have moved above their respective 50% levels.

Expect the index to touch new highs soon – though there may be some consolidation near its previous top of 27355.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty bounced up from support provided by its 20 week EMA – breaking a 4 weeks long down trend, but failing to close above the up trend line UL3.

The drop below UL3 was within the 3% ‘whipsaw’ range – keeping the up trend intact technically. Nifty should cross above UL3 soon, and move up to touch new highs.

Technical indicators are moving sideways in bullish zones. MACD is below its signal line, and just below its overbought zone. ROC is below its 10 week MA in positive territory. RSI and Slow stochastic are above their respective 50% levels.

Nifty is trading above its two weekly EMAs and the longer term Up trend line 2 in a long-term bull market that started from the low touched in Dec ‘11.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices have recovered from 4 weeks long corrections. The long-term bull market is intact. Q2 results declared so far have shown decent top line growth but pressure on bottom lines. The previous post identified sectors that can lead the next leg of the bull market.

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