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Saturday, October 31, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 30, 2015

FIIs turned net sellers during the week, with the bulk of their selling coming on the last trading day of the month (Oct 30). As per provisional figures, their net selling in equities touched Rs 1300 Crores.

Disappointing Q2 (Sep ‘15) results from FMCG majors – like ITC, Nestle, Colgate – and infra giant L&T seemed to spook FIIs.

DIIs more than matched FIIs with their net buying on Oct 30, but they were net sellers during the earlier part of the week.

What was the net result of all this buying and selling during F&O expiry week? Both Sensex and Nifty closed at their lowest levels in 4 weeks.

Modi government appears bogged down in fighting fires lit by irresponsible right wing groups. That didn’t stop the approval of 16 FDI proposals worth Rs 4700 Crores, and announcement of extra incentives for exporters in a belated bid to boost sliding exports.

BSE Sensex index chart

Sensex_Oct3015

The daily bar chart pattern of Sensex rose to test resistance from the blue down trend line on Mon Oct 26. The resistance proved too strong. The index formed a ‘reversal day’ pattern (higher high, lower close) that ended the 7 weeks long rally from the low of 24833 touched on Sep 8 ‘15.

The index closed lower on every single day of the week. In the process, it has dropped below its three EMAs and the ‘measuring gap’ into bear territory.

Bears were expected to put up a fight for a couple of reasons mentioned in last week’s post: overbought technical indicators, and proximity to the blue down trend line. As long as the index trades below the down trend line, bear domination will continue.

Daily technical indicators are looking bearish. MACD has crossed below its signal line and falling in positive zone. ROC has dropped inside negative zone. RSI has slipped below its 50% level. Slow stochastic is ready to enter its oversold zone.

Some more correction is likely. Bulls may be waiting for a trigger to fight back again. Will Bihar election results provide the trigger? Or, will a long-term support level at 26400 be a rallying point?

NSE Nifty 50 index chart

Nifty_Oct3015

The weekly bar chart pattern of Nifty faced twin resistance from the blue down trend line and a ‘breakaway gap’ between 8322 and 8360 (marked on Nifty’s daily bar chart in this post).

The index formed a ‘reversal week’ pattern (higher high, lower close) that ended the 800 points rally from the low of 7539 touched in the week ending on Sep 11 ‘15.

Nifty has closed below its two weekly EMAs and the ‘measuring gap’ in bear territory. Only a convincing move above the blue down trend line can bring bulls back in control of the chart.

Weekly technical indicators do not look encouraging for bulls. MACD has merged with its signal line, and moving sideways in negative zone. ROC is also moving sideways in negative zone. RSI is sliding down in negative zone. Slow stochastic is falling towards its 50% level.

Some more correction is likely.

Bottomline? Chart patterns of Sensex and Nifty faced strong resistance from their respective down trend lines. Bears fought back  to regain their initiative. Long-term bull markets are intact because both indices are trading well above their respective rising 200 week EMAs (not shown). Bulls need to work harder to regain control.

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