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Saturday, March 12, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Mar 11, 2016

After 4 straight months of net selling in equities, FIIs have firmly turned bulls in Mar '16. Their net buying in equities was worth Rs 2700 Crores during the week, and Rs 8600 Crores during the first 8 trading days of the month.

DIIs have turned bears after 4 consecutive months of net buying in equities. Their net selling in equities was nearly Rs 3200 Crores during the week, and Rs 5600 Crores during the first 8 trading days of the month.

Both Sensex and Nifty have rallied more than 10% from their 52 week lows touched on Feb 29 '16, and closed with weekly gains for the 2nd week in a row, but are facing resistances from long-term support/resistance levels.

The IIP number in Jan '16 was -1.53%, against -1.18% in Dec '15. It was the 3rd straight month of contraction in factory output, due mainly to degrowth in manufacturing and capital goods. However, the cumulative figure for the first 10 months of the fiscal year (Apr '15 to Jan '16) was 2.7%, against 2.6% in the previous 10 months period.

"With young workforce and continuing policy reform, India has not only emerged as the fastest-growing economy, but its stars also shine bright amid the current global gloom",  IMF Managing Director Christine Lagarde said earlier today.

BSE Sensex chart pattern


The daily bar chart pattern of Sensex closed with a small weekly gain of 72 points, and managed to trade above its 20 day and 50 day EMAs in a holiday-shortened week. 

But the index continues to trade below its falling 200 day EMA and the blue downtrend line in bear territory, and failed to cross above the long-term 'support/resistance' level of 24830.

All four daily technical indicators are in bullish zones. MACD and ROC are showing upward momentum, but RSI and Slow stochastic are not. ROC and Slow stochastic are well inside their overbought zones.

Expect some correction or consolidation in the zone between 23840 and 24830, before the index can gain sufficient technical 'strength' to rise higher.

If the index does manage to break out above 24830, it will face resistance from its falling 200 day EMA (currently at 25700), and twin resistances from the next 'support/resistance' level of 26300 and the downtrend line. On the downside, 23840 should provide support.

On longer term weekly chart (not shown), Sensex closed more than 1150 points above its rising 200 week EMA in a long-term bull market, but is facing resistance from its 20 week EMA. Weekly technical indicators are showing upward momentum, but remain in bearish zones. 

NSE Nifty 50 chart pattern


The weekly bar chart pattern of Nifty 50 gained about 25 points on a weekly closing basis, but is facing twin resistances from the long-term 'support/resistance' level of 7540 and its sliding 20 week EMA.

If the index overcomes the twin resistances, expect more resistances from the falling 50 week EMA (currently at about 7800), the next 'support/resistance' level of 7950, and the blue downtrend line.

Weekly technical indicators have corrected oversold conditions, but remain in bearish zones. MACD, RSI and Slow stochastic are showing some upward momentum.

The NSE TRIN market breadth indicator (not shown) is looking overbought - hinting at a correction towards 7240. The likely dip will be an adding opportunity.

Bottomline? Chart patterns of Sensex and Nifty are facing strong resistances from long-term 'support/resistance' levels. Some correction or consolidation can be expected. Use the opportunity to enter fundamentally strong stocks. Long-term bull markets are in the process of recovering from year-long corrections.

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