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Sunday, January 4, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Jan 02, 2015

Trading activity was at a low ebb during the first four days of the week, as most FIIs were on vacation due to Christmas and New Year holidays. There was a renewed spurt in activity on Friday as both FIIs and DIIs were net buyers of equity.

Good news came from HSBC’s Purchase Manager’s Index (PMI), which rose to a 2 years high of 54.4 in Dec ‘14 from 53.3 in Nov ‘14. A number higher than 50 indicates growth in industrial activity. Bad news was government’s fiscal deficit touching 99% of full year budget estimates during the first 8 months of the fiscal year.

An increase in excise duty on petrol and diesel to fund infrastructure development programmes should come as welcome news for construction, cement and steel sectors. Withdrawal of excise sops was not-so-welcome news for the automobile sector.

BSE Sensex index chart


The daily bar chart pattern of Sensex traded sideways within a narrow range till Thu. Jan 1 – facing strong resistance from its entangled 20 day and 50 day EMAs. An upward break out occurred on Friday on renewed buying by FIIs.

Daily technical indicators have turned bullish. MACD is still negative, but has crossed above its signal line (which is forming a ‘rounding bottom’ pattern). ROC is positive, and above its 10 day MA (which has formed a bullish ‘rounding bottom’ pattern). RSI has risen above its 50% level. Slow stochastic has just entered its overbought zone.

The support/resistance zone between 26300 and 27350 provided good support to the index during the recent correction. Expect the up move from the Dec ‘14 low of 26469 to continue.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty received strong support from its 20 week EMA and the support/resistance zone between 7840 and 8180, and closed at 8395 – its highest level in 4 weeks. The index is trading above its two weekly EMAs and the dark blue up trend line 2 in a long-term bull market.

Weekly technical indicators are turning bullish. MACD is below its signal line in positive zone, but has stopped falling. ROC is also positive, and has received support from its gradually rising 10 week MA. RSI and Slow stochastic have bounced up after receiving support from their respective 50% levels.

Look for an increase in volumes as Nifty continues with its up move next week. Otherwise, the rally may not sustain.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices have recovered from sharp bull market corrections. Long-term up trends are intact. Both indices should resume the next legs of their bull rallies with buying support from FIIs. If you have booked profits, think about redeployment in long-term debt funds – which should do well with likely reduction in interest rates.

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