Saturday, November 21, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 20, 2015

After the debacle in the Bihar state elections, the government has become more proactive about reform measures. A second round of sops was announced for exporters in a bid to shore up sagging exports.

FIIs remained bears during the week. Their net sales in equities exceeded Rs 2700 Crores, as per provisional figures. DIIs were bulls. Their net buying in equities crossed Rs 3000 Crores.

Both Sensex and Nifty closed around 1% higher for the week, after three straight weeks of losses.

After three years of disappointment, emerging markets (including India) are expected to turn the corner in 2016 – as per Goldman Sachs.

BSE Sensex index chart


The daily closing chart pattern of Sensex remains in a 9 months long down trend, and continues to trade below its three EMAs in bear territory.

However, bulls appear to be defending the extended ‘neckline’ (NL) of the ‘inverse head and shoulders’ pattern well.

Daily technical indicators are in bearish zones, but are in the process of correcting oversold conditions.

Bears will continue to dominate as long as the blue down trend line is not breached, and FIIs remain sellers.

Market action has shifted towards mid-cap and small-cap stocks – several of which touched 52 week highs last week. Investor’s should be aware of the ‘greater fool theory’ before jumping in.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty is trading below its 20 week and 50 week EMAs, but is more than 800 points above its still rising 200 week EMA.

That means the long-term bull market is intact, but the medium-term bearishness remains. What does that imply for small investors?

Those with a long-term view should use the correction as a buying opportunity. Those with a shorter-term view can make the down trend their friend.

Note that the previous bull phase – from the low of Aug ‘13 to the top of Mar ‘15 consumed 19 months. The correction from the Mar ‘15 top has lasted 9.5 months – a 50% time-wise correction.

Expecting the index to fall much lower and for much longer may be counter-productive. Why? Because the long-term bull market is very much alive.

Weekly technical indicators are in bearish zones, but showing some signs of turning around.

Bottomline? Chart patterns of Sensex and Nifty are trying to reverse intermediate down trends. Long-term bull markets are intact because both indices are trading above their respective 200 week EMAs. Time for stock picking is now. If you are unsure about your stock picking skills, enter a good balanced fund.

Related Post

Why the current state of the stock market makes me happy and sad


K said...

50% time correction of the bull period seem to be the average for bear market. Would that be a fair statement?

The quality businesses are going through the same trends as the index. So, this would be a time to turn to an alligator waiting for the price to come to you?


K said...

The previous bear phase seem to be from Nov'10 - Dec'11 and the uptrend taken hold from Jan'12.
But you had considered Aug'13 low as the start of bull phase extending till Mar '15.

Why is Jan'12 not considered as low of bull phase?
How would you categorize the period from Jan'12 - Aug'13?


Subhankar said...

Bear phases last between 25-33% of the previous bull phase. This isn't a 'rule', but an 'observation'.

Long-term investors need to have the patience of an alligator (or a python) at all times. When to pounce should also depend on your asset allocation plan.

Subhankar said...

The following post should answer your second query:

K said...

Many Thanks Subhankar. More than asked for. Very Helpful.


Subhankar said...

You are most welcome, Karthik.