Sunday, April 26, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 24, 2015

The retrospective MAT claim on FIIs came down drastically from an estimated Rs 40000 Crores to a more realistic Rs 600 Crores. Any MAT exemption claims by FIIs located in jurisdictions having double-taxation treaties with India will be settled within a month.

Despite these clarifications, FIIs were in no mood to relent and hit the sell buttons on their equity and debt holdings. The bulk deal on Ranbaxy equity was the sole exception. Buying by DIIs could not prevent Sensex and Nifty from closing about 3.5% lower for the week.

Q4 results declared so far remain mixed. Private sector banks delivered a good set of numbers. But large IT services companies showed top and bottom line weaknesses. Both indices are near important and strong support levels. Any breach of these support levels may lead to  bigger corrections.

BSE Sensex index chart


The daily bar chart pattern of Sensex tested the lower edge of the ‘support-resistance zone’ between 27350 and 28800, and managed to close just above it.

The rising 200 day EMA is just below 27350, and should act as a strong technical support. Why? Because bulls know that a breach of the 200 day EMA can lead to a much bigger correction. So, they will try their best to prevent it.

Daily technical indicators are looking bearish, and a bit oversold. MACD is falling below its signal line in negative territory. ROC is below its 10 day MA and entered its oversold zone. RSI is falling rapidly towards its oversold zone. Slow stochastic has reached the edge of its oversold zone.

Some more correction can not be ruled out, but the odds are beginning to favour a bounce up at any time. A resumption of the bull rally may require some consolidation around current levels.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty dropped sharply below its 20 week EMA, but stopped just short of testing support from the lower edge of the ‘support-resistance zone’ between 8180 and 8630.

All four weekly technical indicators are looking bearish. MACD is falling below its signal line in positive zone. ROC has dropped well below its 10 week MA to its lowest level since Feb ‘14. RSI and Slow stochastic have crossed below their respective 50% levels.

A test of support from the lower edge of the ‘support-resistance zone’ and the rising 50 week EMA appears likely. A fall below the 50 week EMA (at about 8100) can take Nifty down to 7850.

A high volume bounce-up from current levels can send the bears scurrying to cover their shorts. So, remain cautious but stay invested. The bull market isn’t coming to an end any time soon.

Bottomline? BSE Sensex and NSE Nifty charts are feeling the effects of the retrospective MAT overhang, and have dropped to the lower edges of their ‘support-resistance zones’. Both indices are in long-term bull markets. Stay invested. Maintain appropriate stop-losses and use the correction to add to existing stocks in your portfolios.

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