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Saturday, January 2, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Jan 01, 2016

For the second month in a row, and in 4 of the last 5 months, FIIs were net sellers of equity. Their net selling was a little under Rs 2400 Crores during Dec '15. DIIs were net buyers of equity worth Rs 6300 Crores in Dec '15.

How come both Sensex and Nifty closed flat for the month? Probably because FIIs were selling large-cap index stocks, while DIIs were buying non-index large-cap and mid-cap stocks.

Maruti, Hyundai, Ford reported double digit growth in domestic car sales during Dec '15. M&M reported token growth. Tata Motors reported 33% de-growth despite launching new car models, but commercial vehicles showed 6% growth. Eicher reported 40%+ growth in 2-wheeler and CV sales.

Core sector manufacturing numbers for Nov '15 were weak - perhaps due to festive season holidays. That may reflect on the IIP number.

BSE Sensex index chart

The daily bar chart pattern of Sensex rallied past its 50 day EMA but could not proceed much further. F&O expiry and New Year eve celebrations kept trading activities muted.

Resistance from the falling 200 day EMA and the blue downtrend line looms above. A convincing move above the downtrend line is necessary to technically confirm the 'double bottom' reversal pattern and end the 10 months long bear phase.

Daily technical indicators are looking bullish, but overbought. MACD is rising above its signal line in positive zone. ROC faced resistance from the edge of its overbought zone, and has crossed below its rising 10 day MA. RSI and Slow stochastic have entered their respective overbought zones.

Expect some correction next week - which will improve the technical 'health' of the chart. Use any dip to add, as the index continues to trade in a long-term bull market, but use appropriate stop-loss levels.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty closed higher for the third week in a row, but could not overcome resistance from its falling 20 week EMA. There is a good possibility that bears will use the opportunity to sell.

Why?  Because the NSE breadth indicator TRIN (not shown) has reached its extreme overbought zone. The NSE A-D line (not shown) is showing positive divergence by moving above its Dec '15 top. So, any correction may not be a deep one.

Weekly technical indicators are showing bullish signs. MACD is about to cross above its signal line in negative zone. ROC is trying to emerge from its oversold zone. RSI has managed to cross above its 50% level. Slow stochastic has bounced up after receiving support from the edge of its oversold zone.

Bulls still have a lot of work left before they can help the index to resume the next leg of its up move.

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


Anand said...

Namaskar Subhankarji,

Many thanks for your weekly guidance posts.

What are your thoughts on possibilities/directions for 2016 for Indian markets.

Do you think it would be stock specific or in general a bull market.. etc...

Many thanks for your guidance.

Subhankar said...

Karthik Raghavan Ravi asked the following in an email:

"Quick question: if I zoom out the sensex trend all the way out, is it a rounding top that is happening from mid 2014? I know you're cautiously optimistic right now, and wanted to understand your perspective on if this is a valid trend and if so, how it plays with the other indicators you've been posting about."

Subhankar said...

@Anand: Thanks for the kind words.

2016 should be a better year than 2015 for the Indian stock market - but that may not happen till Jul-Aug '16. The economy is in better shape now than it was 6 months back. But it may take another 6 months before results are visible on the ground. The market should hit a new high by Dec '16 - provided there are some more cuts in the repo rate and government spending on infrastructure picks up.

@Karthik: Good observation.

Look at a 2 yr closing chart of Sensex. The 200 day EMA clearly shows a 'rounding top' pattern in progress. The pattern may play out if the index drops convincingly below 25000. Supports at 24000, 23000, 22000 if it does.