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Saturday, February 6, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Feb 05, 2016

FIIs were net sellers of equity worth Rs 1000 Crores last week, as per provisional figures. DIIs were also net sellers of equity during the first three days, but turned net buyers on the last two days. Their net buying for the week was Rs 230 Crores.

Both Sensex and Nifty recovered a bit after touching higher bottoms. However, both indices lost about 1% each on a weekly closing basis.

RBI Governor's hawkish tone - even as he kept interest rates unchanged, poor Q3 (Dec '15) earnings of some large companies, sliding oil prices, worries about a 'hard landing' in China contributed to the bearish sentiment in the market.

Huge over-subscription for the Teamlease IPO is an indication that there is enough investible surplus with investors. 

BSE Sensex chart pattern

The daily bar chart pattern of Sensex made a valiant attempt to move convincingly above its 20 day EMA and the support-resistance level of 24830. Bears were in no mood to relent.

Note that the 24830 level had provided good support to the index back in Sep '15 and Dec '15 (marked by green up arrows). The support was breached in Jan '16 and is now acting as a resistance level (marked by red down arrow).

The index has dropped back inside the support zone between 24830 and 23840. Though the index touched a higher bottom, it is facing resistance from its 20 day EMA.

The down trend from the Mar '15 lifetime high of 30025 has now completed 11 months. Sensex is trading below its three EMAs in bear territory.

Daily technical indicators are showing bullish signs. MACD is moving above its rising signal line in negative zone. ROC has bounced up into positive zone after receiving support from its rising 10 day MA. RSI has crossed above its 50% level. Slow stochastic has slipped below its 50% level, but trying to turn up.

The index may be forming some sort of a reversal pattern - but it will take some more time for the pattern to become clear. The long-term bull market is intact as Sensex is trading more than 1000 points above its 200 week EMA. 

NSE Nifty 50 chart pattern

The weekly bar chart pattern of Nifty tried to move above the support-resistance level of 7540 intra-week, but heavy selling after the RBI Governor announced status quo on interest rates pushed the index down into the support zone between 7240 and 7540.

A possibility of the index consolidating within the support zone till the budget on Feb 29 was indicated in a previous post.

Nifty is trading below its blue down trend line and its two weekly EMAs in bear territory. The 50 week EMA is forming a bearish 'rounding top' pattern. Any breach of the 7240 level can quickly drop the index to 7120.

Weekly technical indicators are in bearish zones and giving mixed signals. MACD and ROC are showing weak downward momentum, whereas RSI and Slow stochastic are showing equally weak upward momentum.

Bottomline? Chart patterns of Sensex and Nifty may be in the process of forming some sort of reversal patterns. Long-term bull markets are still intact, as both indices are trading above their rising 200 week EMAs (not shown). This is not the time to be aggressive as a buyer or seller. Just stick to your investment plans. If that means sitting out for a while - so be it.

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