Saturday, December 26, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 24, 2015

In a truncated trading week, FIIs turned net buyers of equity worth Rs 480 Crores, as per provisional figures. DIIs were also net buyers worth Rs 940 Crores. Both Sensex and Nifty gained about 1.2% on a weekly closing basis.

Interest rate hike in USA has led to a slight fall in the US Dollar - sparking a mild rally in oil prices and strengthening of the Rupee. Expected foreign inflows from Jan '16, particularly into state and central government bonds, should further strengthen the Rupee.

PM Modi spread some Christmas cheer by unexpectedly stopping by in Lahore on his way back from Russia and Afghanistan. Opposition parties called the visit pre-planned due to a nudge from USA to improve neighbourly ties.

BSE Sensex index chart

The daily bar chart pattern of Sensex appears to have formed a 'double bottom' reversal pattern (marked by green arrows) at the 24850 level. The index has crossed above its 20 day EMA but is facing resistance from the 50 day EMA.

A 'double bottom' requires technical confirmation, which will be provided if the index crosses above the highest level between the two bottoms. That would be the Oct '15 top of 27618 - which is almost 1800 points above the week's closing.

To get there, the index has to overcome resistances from the 50 day and 200 day EMAs and the blue down trend line. It won't be easy for bulls. Buying support from FIIs can help.

Daily technical indicators are looking bullish. MACD is rising above its signal line in negative zone. ROC is facing resistance from the edge of its overbought zone. RSI has crossed above its 50% level. Slow stochastic has entered its overbought zone.

The rally may continue during the last week of the year on the back of DII buying, as FII activity is going to be limited.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty closed higher for the second week in a row after receiving support from the long-term support/resistance level of 7540, but continues to trade in bear territory below its 20 week and 50 week EMAs.

As explained in last week's post, the formation of a 'double bottom' reversal pattern will get confirmed only if (and when) the index crosses above its Oct '15 top of 8336.

Weekly technical indicators are beginning to show some signs of turning around. MACD is moving sideways below its signal line in negative zone. ROC and Slow stochastic are trying to move up from the edges of their respective oversold zones. RSI is facing resistance from its 50% level.

Volume bar appears lower than the previous week, but that is because there was no trading on Friday due to the Christmas holiday. Volumes need to pick up next week if the rally is to sustain.

Bottomline? Chart patterns of Sensex and Nifty bounced up from long-term support levels - forming 'double bottom' reversal patterns that are awaiting technical confirmation. Long-term bull markets are intact, as both indices are trading well above their rising 200 week EMAs (not shown). This is a good time to add to your portfolios, but maintain suitable stop-loss levels. 

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