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Saturday, May 23, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – May 22, 2015

Both FIIs and DIIs were net buyers of equity during the week – of about Rs 1800 Crores each. While DIIs were net buyers on all five trading days, FIIs did the bulk of their net buying on Mon. May 18, and were net sellers of small amounts on Tue. May 19 and Fri. May 22.

Sensex and Nifty continued with their recoveries, and closed higher for the 3rd week in a row. But both indices are technically still in down trends after touching lifetime highs on Mar 4 ‘15. Bulls have some work left before the indices can reverse their down trends.

One year of the Modi government has brought mixed reactions from India Inc. Some have appreciated the disappearance of power brokers and corruption. Others have lamented the lack of big-bang reforms. The MAT fiasco should never have occurred. Floor management in the Rajya Sabha could have been coordinated better for passing important bills.

BSE Sensex index chart


The daily bar chart pattern of Sensex managed to close above its three daily EMAs in bull territory after 5 weeks. The 20 day EMA has formed a bullish ‘rounding bottom’ pattern. The 50 day EMA has stopped falling. The 200 day EMA is about to start rising. These are all near term bullish signs.

However, the blue down trend line – connecting the Mar ‘15 and Apr ‘15 tops has not been breached yet. That means the down trend from the Mar 4 ‘15 top is still in force. Though all four technical indicators are looking bullish, two of them – ROC and RSI – are showing downward momentum.

Expect bears to put up a fight to defend the down trend line. If Sensex manages to convincingly cross above the down trend line, the upper edge of the ‘support-resistance zone’ (at 28800) may provide strong resistance.

What can cause the index to start another leg of the down trend? Two things. RBI governor may decide not to cut interest rates – against consensus estimate of analysts. The onset of monsoon may get delayed.

As of now, both those events appear unlikely. The scales are slightly tipped towards bulls.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty crossed above its 20 week EMA intra-week and closed just above it after 5 weeks. Despite three straight higher weekly closes, the falling volume bars indicate that bulls have not regained control yet.

The blue down trend line connecting the Mar ‘15 and Apr ‘15 tops is at the same level as the upper edge of the ‘support-resistance zone’ (at 8630). Expect bears to put up a good fight to preserve the down trend.

Weekly technical indicators are showing signs of bullishness. MACD is moving sideways below its falling signal line in positive territory. ROC has just crossed above its 10 week MA in negative territory. RSI is rising slowly, but is below its 50% level. Slow stochastic has emerged from its oversold zone.

The index is recovering from a strong bear attack, but the recovery is far from complete.

Bottomline? BSE Sensex and NSE Nifty charts are gradually recovering from strong bear attacks but are facing resistances from their respective down trend lines. Expect the indices to consolidate within the ‘support-resistance zones’. An expected interest rate cut, and an early onset of monsoon can boost bullish sentiments. Stay invested.

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