Sunday, January 11, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Jan 09, 2015

Falling price of crude oil and uncertainty about Greece’s possible exit from the Euro zone were the triggers that caused a wave of selling in global stock markets by FIIs last week. They were net sellers of equity worth Rs 2900 Crores in the Indian market.

DII net buying of Rs 1800 Crores prevented bigger falls in Sensex and Nifty. Both indices ended the week with minor losses. Better than expected Q3 results announced by Infosys on Friday helped to revive bullish sentiments.

Consensus estimate of experts foresee weak Q3 results from most companies. That may prevent a pre-budget rally. The government is planning to step up disinvestments in PSU companies during Q4 - which will divert liquidity from the secondary market.

BSE Sensex index chart


The daily bar chart pattern of Sensex dropped inside the support-resistance zone between 26300 and 27350 for the second time in a month. The subsequent upward bounce faced strong resistance from the entangled 20 day and 50 day EMAs.

Since forming a small ‘double top’ reversal pattern at 28800 in early Dec ‘14, the index has been consolidating sideways within a ‘symmetrical triangle’ pattern. A break out from the triangle appears imminent – but in which direction?

Triangles tend to be unreliable patterns. Since the index is in a long-term bull market, the expected break out is upwards. A downward break can test support from the rising 200 day EMA – but that seems unlikely at this stage.

Technical indicators are giving mixed signals, which is often the case during sideways consolidations. MACD is trying to cross above its signal line in negative territory. ROC has entered positive territory but is yet to cross above its 10 day MA. RSI is getting support from its 50% level. Slow stochastic has dropped below its 50% level, but is trying to turn around.

Wait for the break out from the triangle before taking any fresh buy/sell decision.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty dropped below its 20 week EMA into the support-resistance zone between 7840 and 8180. The index received good support from Up trend line 2 and bounced up above the support-resistance zone.

Weekly technical indicators are in bullish zones, but showing some weakness. MACD is falling below its signal line in positive zone. ROC has dropped to its ‘0’ line. RSI is above its 50% level, but sliding down. Slow stochastic bounced up after receiving support from its 50% level.

The overall chart set-up remains bullish – with Nifty trading above its two weekly EMAs and Up trend line 2. The up move should resume after a bit of consolidation.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are consolidating after sharp bull market corrections. Long-term up trends are still intact. Both indices should resume the next legs of their bull rallies soon. Continue with SIPs and add to existing holdings.

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