Saturday, October 24, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 23, 2015

FIIs remained bullish in a holiday-shortened trading week. Their net buying in equities crossed Rs 1600 Crores, as per provisional figures. DIIs kept bulls in check with their net selling of equity worth Rs 900 Crores.

IPOs have started to hit the market on a regular basis now. Coffee Day just managed to gather adequate subscription. A big IPO from Indigo Airline is awaited. That may divert capital from the secondary market.

Q2 (Sep ‘15) results declared so far have been mixed. Money is chasing the few companies that have positively surprised the market. Infrastructure, metal and capital goods companies are still under-performing.

BSE Sensex index chart


The daily bar chart pattern of Sensex had formed an ‘inverse head and shoulders’ reversal pattern with a downward-sloping neckline (marked NL) below the ‘measuring gap’ that appeared on the chart on Aug 24 ‘15.

The subsequent breakout above NL was followed by a rally that completely filled the ‘measuring gap’. The index is currently facing resistance from a smaller 121 points ‘breakaway gap’ between 27443 and 27564 that appeared on Aug 21 ‘15.

This ‘breakaway gap’ was partly filled on Fri. Oct 23. Just above the ‘breakaway gap’ is the blue down trend line that has dominated the Sensex chart since the index touched its lifetime high of 30025 on Mar 4 ‘15.

The 20 day EMA has crossed above the 50 day EMA, and both EMAs are rising towards the 200 day EMA after forming bullish ‘rounding bottom’ patterns.

The index has closed above its three EMAs in bull territory for 5 straight trading days. All these signs indicate that bulls are gradually regaining control of the chart. A convincing cross above the blue down trend line will technically confirm the end of the long bull market correction.

Daily technical indicators are in bullish zones but looking overbought. Bears will try to put up a fight, as next week is F&O expiry week when bulls tend to lighten up on their positions.

Will the index be able to cross above the down trend line? The short answer is: Yes. Why? Because the ‘inverse head and shoulders’ pattern has an upward target of about 28000. (The down trend line is currently at about 27650.)

Won’t the bears defend the down trend line strongly – like they did back in Jul ‘15 and Aug ‘15? They may try, but the clearly formed ‘inverse head and shoulders’ reversal pattern – which usually forms at the end of a down trend – has changed the game in favour of bulls.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty closed higher for the 4th week in a row – closing above the ‘measuring gap’ formed on the chart in the week ending on Aug 28 ‘15 for the 2nd week in a row.

The index is facing resistance from a smaller ‘breakaway gap’ between 8322 and 8360 (marked on the daily bar chart in this post). Immediately above the ‘breakaway gap’, resistance can be expected from the blue down trend line.

The 20 week EMA dropped close to the 50 week EMA, but did not cross below it. Both EMAs have now resumed their up move after forming saucer-like ‘rounding bottom’ bullish patterns. The index closed above both its weekly EMAs in bull territory.

Weekly technical indicators are showing signs of bullishness. MACD has formed a bullish ‘rounding bottom’ pattern and crossed above its signal line in negative zone. ROC has crossed above its falling 10 week MA and is ready to emerge from its negative zone.

RSI is looking a bit bearish by slipping down after facing resistance from its 50% level. Slow stochastic is rising above its 50% level in bullish zone.

Volumes appear to be falling, but remember that last week had only 4 trading sessions due to the Dussehra holiday.

Bottomline? Chart patterns of Sensex and Nifty are on the verge of reversing their down trends. Bearish downward ‘gaps’ have been filled after formation of reversal patterns on daily charts. Long-term bull markets are intact, as both indices are trading well above their respective rising 200 week EMAs (not shown). Looks like ‘acchhe din’ for bulls are just around the corner.

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