Saturday, December 5, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 04, 2015

FIIs resorted to heavy selling during the week gone by. Their net selling in equity was worth Rs 3450 Crores, as per provisional figures. Net buying by DIIs crossed Rs 2300 Crores, and failed to prevent both Sensex and Nifty from closing 2% lower for the week.

Did India’s economy take a sudden turn for the worse? Hardly. In fact, the economy is showing signs of improvement. Bearish sentiments got a boost due to hawkish comments by the US Fed and a slip in India’s services PMI number.

The deluge in TamilNadu that flooded Chennai has caused serious disruptions in industrial activity, with losses estimated at upwards of Rs 15000 Crores.

The important GST bill is stuck in negotiations. NDA government’s conciliatory stance towards Opposition demands has been too little and too late. Implementation of GST from Apr 2016 appears unlikely.

BSE Sensex index chart


The daily closing chart pattern of Sensex lost its upward momentum after briefly crossing above its 20 day EMA. The index has dropped down to seek support from the extended neckline (NL) of the ‘inverted head and shoulders’ pattern.

Will the support hold? Seems unlikely. The 25450 level (marked by dotted horizontal line) can provide some support. But the way FIIs are selling, it won’t be a surprise if the Sep ‘15 low of 24894 is tested - and even breached.

Daily technical indicators are turning bearish. MACD is about to touch its signal line in negative zone. ROC has crossed below its 10 day MA and entered negative zone. RSI and Slow stochastic have dropped to their respective 50% levels.

Front line stocks are under pressure due to selling by FIIs. Many mid-cap and small-cap stocks are flying around. Investors should be cautious about which stocks to pick.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty succumbed to heavy volume of FII selling and lost most of the gains made in the previous two weeks.

A test - and possible breach – of the Sep ‘15 low of 7540 may be on the cards. The index continues to trade below the down trend line and its two weekly EMAs in bear territory.

Weekly technical indicators remain in bearish zones. MACD is sliding down below its signal line in negative zone. ROC is about to cross below its 10 week MA in negative zone. RSI and Slow stochastic are moving sideways below their respective 50% levels.

The long-term bull market is intact, as the index is more than 700 points above its rising 200 week EMA. Sometime next year, when (not if) the index moves above its Mar ‘15 top, the current Nifty level will seem very attractive.

Bottomline? Chart patterns of Sensex and Nifty are facing renewed bear attacks. Long-term bull markets are intact because both indices are trading well above their respective 200 week EMAs (not shown in above charts). This is as good a time as any to add to your stock portfolio. New investors, planning to enter the market for the first time, should stick to a balanced fund.

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