Saturday, November 7, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 06, 2015

After 2 months of heavy selling, FIIs turned net buyers of equity worth Rs 3000 Crores during Oct ‘15. DIIs were net sellers of equity worth Rs 1500 Crores, as per provisional figures.

In the first trading week of Nov ‘15, FIIs were net sellers of equity worth about Rs 1500 Crores. DIIs were net buyers worth Rs 1000 Crores. Both Sensex and Nifty have dropped near important support levels.

Will the supports hold, or will both indices seek lower levels? The result of Bihar state elections may provide the immediate trigger. The market seems to have discounted a defeat for the NDA.

Q2 (Sep ‘15) results continue to disappoint. Tata Steel, SAIL, Tata Motors, M&M showed top line and bottom line pressure. A big recovery is unlikely in Q3 (Dec ‘15). A performance turnaround should be visible from Q4 (Mar ‘16) onwards – as a lower base effect will come into play.

BSE Sensex index chart


The daily bar chart pattern of Sensex faced strong resistance from the blue down trend line, and has dropped below its three EMAs into bear territory.

The index has slipped below the 26400 level, which had provided support during Dec ‘14, May ‘15 and Jun ‘15. It is seeking support from the neckline (marked NL) of the ‘inverse head and shoulders’ pattern.

If the index falls below NL, it can drop to test the Sep ‘15 low of 24833 (marked Head). Bulls can be expected to put up a fight to prevent that.

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

An upward bounce can occur at any time. Will that be a buying opportunity? Volumes accompanying the likely bounce will decide the answer: strong volumes – Yes; weak volumes – No.

Note that RSI and Slow stochastic are showing negative divergences by dropping to their Sep ‘15 lows, and hinting at a continuation of the correction.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty faced twin resistances from the blue down trend line and the ‘support-resistance level’ of 8335. The index is trading below its two weekly EMAs in bear territory.

The 7950 level, which had acted as a support during Dec ‘14, May ‘15 and Jun ‘15 has just about managed to prevent the index from falling further. But the relief may be temporary for bulls.

Only an unexpected victory by NDA in the Bihar elections can change the current market mood of despondence. The exit polls do not suggest such a possibility.

Weekly technical indicators are in bearish zones. MACD remains merged with its signal line in negative zone. ROC is looking a little bullish by rising above its 10 week MA, but is still inside negative zone. RSI is sliding down towards its oversold zone. Slow stochastic is about to fall below its 50% level.

Bottomline? Chart patterns of Sensex and Nifty faced strong resistances from their respective down trend lines, and are near crucial support levels. Long-term bull markets are still intact since both indices are trading well above their respective rising 200 week EMAs (not shown). Remain cautious, but keep a ‘buy list’ ready.

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