Saturday, March 21, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Mar 20, 2015

The mining bill got passed in the Rajya Sabha – this time with support from Trinamool Congress. The turnaround from a very vocal opposition party shows good ‘floor management’ by NDA. Perhaps a ‘quid pro quo’ (‘You help us to pass bills, we won’t oppose you strongly in the forthcoming municipal elections’)?

Advance tax figures available so far indicate that many companies are not performing well. That means Q4 results are not going to be any better than Q3 results. With most good news already ‘discounted’, Sensex and Nifty had no place to go but down.

As per provisional data for the week, FIIs were net buyers of equity worth Rs 830 Crores while DIIs were net sellers of equity worth Rs 1130 Crores. So, it isn’t a surprise that both indices closed lower for the week. What was a bit of a surprise was that on Thu. Mar 19, FIIs were net buyers of Rs 1430 Crores, and DIIs were also net buyers of Rs 50 Crores – yet both indices fell.

BSE Sensex index chart


The ongoing correction in the daily bar chart pattern of Sensex from its all-time high of 30025 (touched on Mar 4 ‘15) has formed a ‘falling wedge’ pattern that has bullish implications.

Daily technical indicators are starting to look oversold. MACD is falling below its signal line in negative territory. ROC and RSI have dropped to the edge of their respective oversold zones. Slow stochastic is already inside its oversold zone.

Note that Sensex formed an upward ‘gap’ of 190 points on Jan 15 ‘15. This ‘gap’ is near the lower edge of the support zone between 27350 and 28800 (marked by dotted horizontal lines). The ‘gap’ has remained unfilled so far, and should provide support on the downside.

If the ‘gap’ gets filled during the ongoing correction, the up move should resume thereafter. In other words, even if the correction continues a bit longer, the technicals are suggesting a turnaround in the near future.

Due to F&O expiry next week, activity may remain low. No need to jump in feet first. If you were waiting for a correction to enter/add, this may be a good time to do so gradually.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty dropped inside the support zone between 8180 and 8630, but received good support from its 20 week EMA and the lower edge of a ‘falling wedge’ pattern within which it has been trading for the past three weeks.

The likely break out from a ‘falling wedge’ is upwards. In case Nifty corrects some more, the blue Up trend line 2 should provide good support. Technical experts have already started talking about the 8000 level – which is the current level of the 50 week EMA. But it seems unlikely that the index will fall that far.

Weekly technical indicators have corrected overbought conditions, but are in bullish zones. MACD and Slow stochastic have dropped from their respective overbought zones and showing downward momentum. But ROC and RSI are showing upward momentum.

The index has corrected just over 6% from its lifetime high of 9119 (touched in the week ending on Mar 6 ‘15). Some more correction is possible. But the correction appears to be on its last legs.

Bottomline? BSE Sensex and NSE Nifty indices are correcting within bullish ‘falling wedge’ patterns formed on both charts. Upward break outs from the ‘wedges’ can occur at any time. Both indices are in long-term bull markets. The corrections are providing adding opportunities.

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