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Saturday, January 16, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Jan 15, 2016

Plummeting oil price and a crash in the Chinese stock market continues to spook FIIs, who have been on a selling spree across global markets. Already there is talk about a 2008-like bear market - specially from those experts who propound the 8 years market cycle.

As per provisional figures, FIIs were net sellers of equity worth Rs 4300 Crores last week. Their total sales during the first half of the month has crossed Rs 7600 Crores. DIIs were net buyers of equity worth Rs 3900 Crores last week. Their total buying during the first half of Jan '16 was Rs 5350 Crores.

WPI inflation number for Dec '15 was -0.73%, its 14th straight month of contraction. The revised figures for Nov '15 and Oct '15 are -1.99% and -3.7% respectively. Food inflation rose to 8.17% - its steepest rise in 17 months.

BSE Sensex chart pattern


The daily bar chart pattern of Sensex spent a volatile week, oscillating within a range of 630 points near the support level of 24830 (which had provided support to the index in Sep '15 and Dec '15).

The index closed near the lowest point of the week - 375 points below the support level of 24830 - losing about 1.7% on a weekly closing basis. A bearish pattern of 'lower tops and lower bottoms' that got briefly stalled in Dec '15 has resumed.

The index is trading well below its blue downtrend line and its three falling daily EMAs in a bear market. So, is it 'game over' for bulls?

Not quite. All four technical indicators are looking oversold, which can lead to a technical bounce at any time. Also, the fall below the support level of 24830 remains within the 3% 'whipsaw' limit - keeping faint bullish hopes alive.

Whether any technical bounce will be strong enough to reverse the 10 months long downtrend is a moot point. Sensex is still trading 950 points above its 200 week EMA in a long-term bull market.

NSE Nifty 50 chart pattern


The weekly bar chart pattern of Nifty dropped and closed 100 points below the support level of 7540, losing 2.1% on a weekly closing basis. The index has resumed its bearish pattern of 'lower tops and lower bottoms'.

Nifty is trading below its blue downtrend line and its two falling weekly EMAs in a bear market. The 50 week EMA is forming a bearish 'rounding top' pattern.

Weekly technical indicators are in bearish zones and showing downward momentum, hinting at a continuation of the correction. However, all four indicators are beginning to look oversold, which could lead to a technical bounce.

The breadth indicator TRIN (not shown) is rising inside its oversold zone - indicating that a counter-trend move may be around the corner. It is unlikely that such a move will lead to a change of trend because of the bearish mood of FIIs.

Bottomline? Chart patterns of Sensex and Nifty have breached long-term support levels, leaving the door open for deeper corrections. Long-term bull markets are still intact, as both indices are trading above their rising 200 week EMAs (not shown). Use the dip to accumulate slowly. You don't need to be greedy just because others are fearful.

(Note: Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jan. 21, 2016. Enrolments have started. Contact me for details:mobugobu@yahoo.com.)

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