BSE Sensex and NSE Nifty 50 index chart patterns – Nov 21, 2014

DIIs were net sellers of equity worth Rs 730 Crores during the week. FIIs were net buyers of equity worth only Rs 270 Crores. So, why did Sensex and Nifty touch new highs on Friday? Because both FIIs and DIIs were net buyers on the last day of the week.

Since the market is being controlled by the  big boys, what are small investors supposed to do? “When elephants fight, the grass gets hurt” (African proverb). Don’t be the grass. Be a bird. Sit on top of a tree (wait and watch) or fly away to a safer place (invest in debt funds or balanced funds).

A surprising interest rate cut by China – the first such action in 2 years - and ECB’s announcement of increasing economic stimulus caused a surge in global stock markets. Gold and oil prices rose too. However, any interest rate cut by RBI seems unlikely before Feb ‘15.

BSE Sensex index chart

For the third straight week, the daily bar chart pattern of Sensex consolidated sideways with an upward bias, and touched new intra-day (28361) and closing (28335) highs on Fri. Nov 21. All three EMAs are rising, and the index is trading above them in a long-term bull market.

The index has so far gained 34% during this calendar year (since Jan ‘14) and 26% this financial year (since Apr ‘14). Those are substantial gains for a large-cap index. Periodic corrections have kept the Sensex chart technically ‘healthy’.

Daily technical indicators are in bullish zones, and looking overbought. MACD has bounced up from its rising signal line and looks poised to enter its overbought zone. ROC has formed a small ‘rounding bottom’ bullish pattern that prevented it from entering negative territory, and is getting ready to cross above its falling 10 day MA. RSI and Slow stochastic are inside their respective overbought zones.

All four indicators failed to touch new highs with the index. That may lead to a continuation of the sideways consolidation with an upward bias next week. Stay invested.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty again touched new intra-week (8490) and closing (8477) highs during the week, and gained about 90 points. The index continues to trade above its weekly EMAs and Up trend line 2 in a long-term bull market. Volumes slid a little, but remained above the long-term (14 week) moving average.

Weekly technical indicators are looking overbought. MACD is entangled with its signal line inside overbought zone. ROC is trying to re-enter its overbought zone, and has crossed above its 10 week MA. RSI and Slow stochastic are moving sideways inside their respective overbought zones.

The sideways consolidation with an upward bias is likely to continue next week, which is also F&O expiry week.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices touched new lifetime highs while consolidating in long-term bull markets. Try to control your impulses of greed or fear. The bull market is far from over. That doesn’t mean there won’t be corrections along the way.