Saturday, March 28, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Mar 27, 2015

Militant groups have been under fire on several fronts. Pakistani Air Force is pounding Taliban fighters on the Af-Pak border. USA has resumed air strikes on IS in Iraq. Saudi Arabian jets bombed Houthi militants in Yemen.

Global markets were spooked by the possibility that movement of oil tankers through Aden may get affected. Prices of oil (and gold) spiked up. Stock markets took steep dives.

Sensex and Nifty negated bullish ‘falling wedge’ patterns (drawn on charts last week) by their sharp falls, and are trading near the lower edges of their respective support zones. Both indices have corrected around 9% from their all-time highs touched earlier this month.

As per provisional figures, FIIs were net buyers of equity worth Rs 1100 Crores. DIIs were also net buyers of equity worth Rs 1200 Crores during the week. So, who killed the market? “..after all, it was you and me” (with due credit to the Rolling Stones, Sympathy for the Devil).

BSE Sensex index chart


The daily bar chart pattern of Sensex has corrected almost 2800 points (9.25%) from its lifetime high of 30025 touched on Mar 4 ‘15.

Is the bull market coming to an end? Not till Sensex and the 50 day EMA crosses below the 200 day EMA. Where is the index headed? To look for answers, let us check the facts:-

Bearish points:

  • The 20 day EMA has crossed below the 50 day EMA, and the index is trading below both EMAs
  • The lower edge of the ‘support zone’ was breached during Friday’s trading
  • The upward ‘gap’ formed on Jan 15 failed to provide support and has been filled
  • All four daily technical indicators are in bearish zones

Bullish counterpoints:

  • The 200 day EMA is still rising, and the index is trading above it
  • Though the ‘support zone’ was breached intra-day, the index moved up to close within the ‘support zone’
  • The filling of an upward ‘gap’ is usually followed by a resumption of the up move
  • All four technical indicators are looking oversold, and showing some signs of reversing direction

As per anecdotal evidence, HNI and retail investors have been selling. Expectations of a poor Q4 results season have already been ‘discounted’. Technically, a turnaround seems just around the corner. This may be a good time to slowly accumulate fundamentally strong stocks.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty has corrected 850 points (9.3%) from its lifetime high of 9119 touched in the week ending on Mar 6 ‘15. Can the index correct some more?

Most of the technical signals are pointing to such a possibility. The index has dropped below its 20 week EMA, and the Up trend line 2. However, Nifty closed within the 3% ‘whipsaw’ limit of the trend line.

On the downside, expect support from the lower edge of the ‘support zone’ at 8180, and the rising 50 week EMA (at 8000). Can Nifty drop below its 50 week EMA? Nothing can be ruled out. But the TRIN (a breadth indicator – not shown) is suggesting a turnaround.

Weekly technical indicators are looking bearish. MACD is falling below its signal line in positive territory. ROC is below its 10 week MA and has dropped inside negative zone. RSI is seeking support from its 50% level. Slow stochastic has slipped below its 50% level.

Bottomline? The corrections on BSE Sensex and NSE Nifty charts have reached important support levels. A pullback – if not a reversal of the intermediate down trend – may be on the cards. Both indices are still in long-term bull markets. The corrections are providing long-term entry opportunities.

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