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Sunday, December 28, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 26, 2014

Activity was comparatively low in F&O expiry week that was shortened by Christmas holiday. Both Sensex and Nifty flattered to deceive – their gains during the earlier part of the week getting wiped out by the end.

FIIs net sold equities worth Rs 3500 Crores. DIIs were net buyers of Rs 1830 Crores. Strong US GDP number and rising Dollar index motivated FIIs to book profits. Both indices showed some resilience by falling marginally.

The President signed ordinances to increase foreign equity in insurance (from 26% to 49%) and to initiate auction for reallocation of coal blocks. The respective legislations were held up in the Rajya Sabha by opposition parties during the recent winter session of parliament.

The Government adopted the ordinance route to send a strong message that needed reforms can not be held hostage by petty politics.

BSE Sensex index chart

Sensex_Dec2614_ST

The daily bar chart pattern of Sensex moved briefly above its 20 day and 50 day EMAs during the early part of the week, but dropped below both EMAs into the support zone between 26300 and 27350 by the end of the week.

Technical indicators have corrected oversold conditions, but remain in bearish zones. MACD is sliding below its falling signal line in negative territory. ROC crossed above its 10 day MA, but failed to enter positive zone. RSI emerged from its oversold zone, but has dropped down. Slow stochastic failed to rise above its 50% level, and is slipping down.

Some more consolidation is likely. Several good stocks have corrected from their recent highs – giving entry opportunities.

NSE Nifty 50 index chart

Nifty_Dec2614_LT

The weekly bar chart pattern of Nifty briefly dropped inside the support zone between 7840 and 8180 (marked by blue dotted lines), but received good support from its 20 week EMA and closed just above the support zone.

Weekly technical indicators have corrected overbought conditions, but remain in bullish zones. MACD has crossed below its signal line, and dropped from its overbought zone. ROC has crossed above its 10 week MA in positive zone. RSI is sliding down towards its 50% level. Slow stochastic is falling rapidly towards its 50% level.

Expect some more consolidation before Nifty resumes its up move. The index is trading above both its weekly EMAs in a long-term bull market. The dip provided an entry opportunity.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are recovering from sharp bull market corrections. Long-term up trends are intact. Both indices should resume the next legs of their bull rallies after some consolidation.

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