Are you worried about the recent volatility in the Stock Market? Are you confused what to buy, sell or hold? The newsletter selects quality mid-caps and small-caps for investors with a long-term perspective and provides timely buy/sell/hold suggestions. Send an email (to address in profile below) for subscription details today.

Sunday, December 21, 2014

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

In the last full week of trading in calendar year 2014, both Sensex and Nifty indices bounced up after testing support levels to close marginally higher for the week. However, neither index is technically out of the woods yet – so caution is advised.

FIIs continued their selling spree in equity throughout the week. DIIs were net buyers. For the month of Dec ‘14 so far, FIIs have been net sellers of about Rs 940 Crores while DIIs turned bulls by buying equity worth Rs 3630 Crores.

Important bills are getting stuck in Parliament as opposition parties – particularly a scam-tainted one – have been obstructing proceedings on various pretexts. Offshoots of the ruling party have done their bit in stalling proceedings with their respective divisive agenda.

BSE Sensex index chart


The following comment appeared in last week’s analysis of the daily bar chart pattern of Sensex: “The index may find support in the zone between 26300-27000.” Note that the index dropped to an intra-day low of 26469 on Wed. Dec 17 before bouncing up.

Though the index has managed to climb above the 27350 level by the end of the week, it is facing twin resistance from its falling 20 day and 50 day EMAs. A new high may elude bulls during the remainder of this calendar year.

Technical indicators are in the process of correcting oversold conditions, but are in bearish zones. MACD has stopped falling, but is well inside negative zone and below its signal line. ROC has formed a small ‘rounding bottom’ bullish pattern inside its oversold zone, and is trying to cross above its falling 10 day MA. RSI has also formed a small ‘rounding bottom’ pattern inside its oversold zone. Slow stochastic has just emerged from its oversold zone.

The correction has improved the technical ‘health’ of the chart. The index is trading well above its rising 200 day EMA in a long-term bull market. By touching a higher bottom, the bullish pattern of ‘higher tops and higher bottoms’ continues.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty dropped below its 20 week EMA intra-week for the first time since Feb ‘14, but found strong support from the 7840 level and the rising Up trend line 2 (in dark blue). The index bounced up to close above its 20 week EMA and the 8180 level – closing flat for the week, but on an uptick in volumes.

Weekly technical indicators have corrected overbought conditions, but remain in bullish zones. MACD has crossed below its signal line, and is about to drop below its overbought zone. ROC is trying to cross above its 10 week EMA in positive zone. RSI and Slow stochastic have dropped from their respective overbought zones, but are above their respective 50% levels.

A bit of consolidation can’t be ruled out. The index is trading above both its weekly EMAs in a long-term bull market.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are overcoming sharp bull market corrections. Both indices should resume the next legs of their bull rallies soon. The corrections provided good entry opportunities.

No comments: