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Sunday, July 5, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Jul 03, 2015

A dark cloud hanging over global stock markets is the Greek referendum on whether to accept austerity measures proposed by ECB and IMF, or not. As per opinion polls, there is a 50-50 split between ‘Yes’ and ‘No’ votes.

The Greek government has been campaigning for a ‘No’ vote – which can have repercussions on the stability of the Euro zone. Some of the backlash may temporarily affect the Indian market, though the possibility of a ‘No’ vote has been largely discounted.

Reports of increase in government spending, unlocking of stalled projects, a decent monsoon so far, announcements of big-ticket schemes like Smart Cities, Digital India, solar power and irrigation helped to boost bullish sentiments.

FIIs turned net buyers of equity worth Rs 1000 Crores during the first three trading days of Jul ‘15, as per provisional figures. DIIs turned net sellers – with their selling totalling just under Rs 400 Crores. Both Sensex and Nifty closed higher for the third week in a row.

BSE Sensex index chart


In last week’s post on the daily bar chart pattern of Sensex, “…a pullback to the down trend line or, even below it to the 200 day EMA” was mentioned as a possibility. The index did just that on Mon. Jun 29 ‘15, but bounced up to close above its three EMAs and the down trend line in bull territory.

The 28100 level – which is right in the middle of the ‘support-resistance zone – is providing a bit of resistance. This is one of those ‘coincidences’ that frequently appear on price charts, and make technical analysis an interesting pursuit.

The 20 day EMA is about to cross above the 50 day EMA. All three EMAs have started rising, and the index is trading above them in a bull market. There may be technical headwinds ahead, but the correction from the Mar ‘15 lifetime high seems to be over.

Daily technical indicators continue to look bullish and overbought. MACD is rising above its signal line towards overbought territory. ROC is looking a little weak by correcting from its overbought zone and crossing below its 10 day MA. RSI and Slow stochastic are well inside their respective overbought zones, but not showing much upward momentum.

The index appears to be waiting for the outcome of the Greek referendum and Q1 (Jun ‘15) results to resume its up move. Overbought conditions may lead to some consolidation or correction.

NSE Nifty 50 index chart


The following remarks appeared in last week’s post on the weekly bar chart pattern of Nifty: “Expect another interesting fight for dominance between bulls and bears next week – with bulls having a slight advantage.”

Note that the index dropped lower during the week to test support from the lower edge of the ‘support-resistance zone’, but bounced up strongly to close well above its two weekly EMAs and the blue down trend line.

Is it time to celebrate for bulls? The week’s smaller volume bar suggests otherwise. Any upward break out (in this case, above the down trend line) should be accompanied by an increase (and not a decrease) in volumes.

The possibility of a pullback towards the down trend line (or even a drop below it) can’t be ignored. Since the index is trading above its two weekly EMAs in a bull market, any pullback can be used as an adding opportunity.

Weekly technical indicators are turning bullish. MACD is started rising towards its falling signal line, and looks poised to enter positive zone. ROC is showing strong upward momentum by crossing above its 10 week MA and entering positive territory. RSI has just managed to move above its 50% level. Slow stochastic is expected to follow suit.

Bottomline? The 4 months long down trends on BSE Sensex and NSE Nifty charts appear to have ended. Bears are still not out of the game, but are fighting a losing battle. Both indices are back in bull territories. Stay invested. If you have some savings and are itching to enter the market for the first time, start a SIP in a good balanced fund and build up your capital. The stock market can be an expensive teacher.

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