Sunday, June 14, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Jun 12, 2015

Finally some good news to counter the bearish ‘poor monsoon’ sentiment. The IIP number – aided by growth in manufacturing and cap. goods sectors – came in higher than consensus estimate at 4.1% in Apr ‘15 vs. 2.1% in Mar ‘15. However, CPI inflation inched up above 5%, which is not so good news.

FIIs remained net sellers of equity during the week. As per provisional figures, their net selling during the first two weeks in Jun ‘15 has crossed Rs 4400 Crores. That figure was offset by the DIIs, whose net buying in equities was almost Rs 5700 Crores.

Down trends – marked by blue trend lines – continue to dominate both Sensex and Nifty charts below. Both indices closed lower for the third straight week – to their lowest levels in nearly 8 months.

BSE Sensex index chart


The daily bar chart pattern of Sensex dropped below the May ‘15 low of 26424, and is seeking support from the 26300 level – which corresponds to the top touched in Jul ‘14. Will the support hold?

Technical signs are bearish. The 20 day EMA has crossed below the 200 day EMA – for the first time since Aug ‘13. The 50 day EMA is falling towards the 200 day EMA, and a convincing cross below (‘death cross’) will confirm a bear market.

Daily technical indicators are bearish and looking oversold. MACD is falling below its signal line towards its oversold zone. ROC has entered its oversold zone after failing to cross above its falling 10 day MA. RSI is trying to emerge from its oversold zone. Slow stochastic is well inside its oversold zone.

The index has closed below its 200 day EMA for 9 straight trading sessions. But all is not gloom and doom – yet. Why? Because the index has so far closed within the 3% ‘whipsaw’ limit below the 200 day EMA.

Technical nitpicking, you think? On such nitpicking are fortunes made! In other words, there is a possibility of a technical bounce from current level. Whether it turns into a full fledged rally or not will depend a lot on the progress of the monsoon and Q1 results to be announced from next month.

Whatever you do, do not sell in a panic. It is a difficult thing to do when your portfolio value keeps diminishing every day. These are tests that you need to pass if you want to build wealth during long-term bull markets.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty closed below the 8000 level (at 7983) for the first time since the week ending on Oct 17 ‘14, and below its 50 week EMA for the first time since the week ending on Sep 6 ‘13.

Since the index closed within the 3% ‘whipsaw’ limit below its 50 week EMA, the breach is technically not valid yet. But that may be a small respite for bulls.

Weekly technical indicators are bearish and looking oversold. MACD is falling below its signal line, and entered negative zone. ROC and RSI have dropped to the edge of their respective oversold zones. Slow stochastic has entered its oversold zone.

Oversold conditions may prevail for long periods during bear markets. In bull markets – and technically Nifty is still in a bull market – oversold conditions are usually of shorter durations.

Slow stochastic and ROC (not clearly visible) have both touched slightly higher bottoms than the ones they touched in May ‘15. The positive divergences may lead to a technical bounce, if not a rally.

The NSE TRIN (a breadth indicator) is looking extremely oversold – at a level not seen in the past 2 years.

Bottomline? Bears are still dominating BSE Sensex and NSE Nifty charts, and will remain dominant as long as both indices trade below their respective down trend lines. Technical bounces in both indices are likely. Stay invested, but remain cautious.

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