BSE Sensex and NSE Nifty 50 index chart patterns – Apr 10, 2015

There was good news on the macroeconomic front. The IIP number for Feb ‘15 was at a three-month high of 5%. The revised figure for Jan ‘15 is 2.8%. Growth was broad-based. Only consumer durables showed contraction.

Passenger car sales increased by 5% during 2014-15, after decrease of 7.7% and 4.7% in the previous two years. Commercial vehicle sales declined by 2.8%. However, sales of medium and heavy commercial vehicles increased by 16%.

In the 2-wheeler segment, motorcycle sales declined 2.5%, but scooter sales jumped 25%. A deficient monsoon last year and unseasonal rains this year affected motorcycle sales in rural India.

FIIs and DIIs were net buyers of equity during the past week. As per provisional figures, FIIs bought equity worth Rs 1150 Crores. DIIs were net buyers of Rs 240 Crores. Both Sensex and Nifty indices are back in bull territory, but facing overhead resistances.

BSE Sensex index chart

The following comment was made in last week’s analysis of the daily bar chart pattern of Sensex: “Bears may put up a fight to defend the 28800 level.”

Sensex is trading above its three EMAs in bull territory, but has so far failed to convincingly cross above the upper edge of the ‘support-resistance zone’ between 27350 and 28800.

The index has retraced nearly 60% of its 2777 points correction from its Mar 4 top of 30025 to the Mar 27 low of 27248. A retracement of more than 50% (a Fibonacci level) usually means that a correction is over.

However, a more convincing retracement of a correction will be the Fibonacci level of 61.8% – i.e. a close above 28965. Is that likely to happen soon?

Daily technical indicators are suggesting as much. MACD is rising above its signal line, and is poised to enter positive zone. The signal line is forming a bullish ‘rounding bottom’ pattern. ROC is above its 10 day MA – which has also formed a ‘rounding bottom’ pattern - in positive territory. RSI has moved above its 50% level. Slow stochastic has entered its overbought zone.

Will the index touch a new high? There should not be any doubts about that. When? That’s a good question! Let’s say – sooner rather than later.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty closed at its highest level in 5 weeks, and climbed out of the ‘support-resistance zone’ between 8180 and 8630.

The index is trading above its two weekly EMAs in bull territory, but is facing resistance from Up trend line 2. Strong volumes during the week is a good sign for bulls.

Weekly technical indicators are beginning to turn bullish. MACD is below its signal line, but has stopped falling. ROC is below its 10 week MA, but about to re-enter positive territory. RSI is moving sideways above its 50% level. Slow stochastic has stopped falling, and looks ready to start rising again.

Bears may make a last stand at current levels, but bullish sentiment is gaining ground.

Bottomline? BSE Sensex and NSE Nifty charts have almost recovered from sharp bull market corrections, but bulls still need to overcome overhead resistances. Both indices are in long-term bull markets. Mid-cap and small-cap indices are showing strength. This may be a good opportunity to get rid of some of the non-performers in your portfolios.