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Sunday, August 9, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Aug 07, 2015

Q1 (Jun ‘15) results declared so far have been less than encouraging, with top line and bottom line pressure visible across sectors. PSU banks continue to disappoint. Auto biggies like Tata Motors and M&M declared weak numbers.

Modi’s “Make in India” campaign got a boost with Taiwan’s Foxconn – world’s largest contract electronics manufacturer that supplies to Apple, Amazon, Blackberry, Xiaomi – signing a 5 years, $5 Billion investment deal with the Maharashtra government.

As per provisional figures, FIIs were net buyers of equity worth Rs 930 Crores last week. DIIs were net sellers of equity worth Rs 410 Crores. Both Sensex and Nifty closed marginally higher on a weekly basis, but failed to cross above resistance levels.

BSE Sensex index chart


The daily bar chart pattern of Sensex traded with a slight upward bias between the two up trend lines (drawn on the Sensex chart last week). The index is trading above its three EMAs in a bull market, and may be forming a bullish ‘rounding bottom’ or ‘cup and handle’ pattern.

That is good news for bulls. Three of the four daily technical indicators have turned bullish. MACD has just crossed above its signal line in positive zone. ROC has moved above its 10 day MA and entered positive territory. Slow stochastic has risen above its 50% level.

RSI has failed to enter bullish zone, and is moving sideways below its 50% level. Sensex is still inside the ‘support-resistance zone’ and needs to cross above 28800 with good volume support for bulls to regain full control.

Expect bears to put up a fight to defend the 28800 level. Stay invested.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty received good support from its 20 week EMA intra-week, and bounced up with good volume support to close about 30 points higher on a weekly basis.

The index is trading above its two weekly EMAs and the blue up trend line in a bull market, but failed to cross above the ‘support-resistance zone’ between 8180 and 8630.

Nifty may be in the process of forming a ‘rounding bottom’ or a ‘cup and handle’ pattern. If either pattern plays out, the index can break out above its lifetime high of 9119 (touched in Mar ‘15). Note the bullish ‘saucer’ pattern being formed by the 20 week EMA.

Weekly technical indicators have turned bullish. MACD has crossed above its signal line in positive zone. ROC is moving above its rising 10 week MA in positive zone. RSI is rising above its 50% level. Slow stochastic has entered its overbought zone after 5 months.

Bears may try to defend the resistance zone between 8630 and 8670 (the technical significance of the two levels were mentioned last week). But it is looking like a lost cause.

Bottomline? The bar chart patterns of Sensex and Nifty appear to be forming bullish continuation patterns. Long-term trends are bullish. If you wish to enter now, do so gradually. Pick ‘good’ stocks and maintain appropriate stop-losses. First-timers will be better off by regularly investing in units of a good balanced fund.

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