Sunday, March 20, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Mar 18, 2016

FIIs were net buyers of equity worth more than Rs 4000 Crores during the past week. DIIs were net sellers of equity worth Rs 2350 Crores, as per provisional figures. Forex reserves increased by $2.54 Billion during the week.

Since the beginning of the month, FII net buying in equity has touched Rs 12700 Crores, exceeding their net selling during Feb '16. DII net selling in equity month-to-date is worth Rs 8000 Crores.

Both Sensex and Nifty closed higher for the third week in a row - at their highest levels in more than 2 months. However, long-term resistance levels on both indices have not been convincingly breached yet - keeping bearish hopes alive.

Next week has only three trading sessions because of Holi and Good Friday holidays. Volumes may remain muted, and both indices are expected to consolidate near current levels. 

BSE Sensex chart pattern

The daily bar chart pattern of Sensex consolidated sideways with a slightly upward bias, and closed with a weekly gain of 235 points (about 1%).

The index traded the entire week above its 20 day and 50 day EMAs, and closed above the long-term resistance level of 24830. The 20 day EMA is about to cross above the 50 day EMA. These are bullish signs in the near term.

Note that the 200 day EMA is still sliding down, and the index is trading below it. The close above the 24830 level has not been a convincing one yet - because the index remains within the 3% 'whipsaw' limit above it. The blue downtrend line continues to rule the chart. These are longer term bearish signs.

Three of the four daily technical indicators - MACD, RSI, Slow stochastic - are inside their overbought zones. ROC has already corrected from its overbought zone, and crossed below its 10 day MA. 

Some more consolidation or a correction may be just around the corner. Any dip can be used to add to existing positions. The 23840 level should provide good support on the downside.

In case the rally continues on the back of buying by FIIs, overhead resistances can be expected from the 200 day EMA, the downtrend line and the 26300 level.

On longer term weekly chart (not shown), Sensex closed nearly 1400 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 some upward momentum, but MACD, ROC and RSI remain in bearish zones. 

NSE Nifty 50 chart pattern

The weekly bar chart pattern of Nifty 50 gained 94 points (1.25%) on a weekly closing basis. It closed above the long-term resistance level of 7540, and also above its 20 week EMA for the first time since the week ending on Oct 23 '15.

However, the index is trading below its falling 50 week EMA. The blue downtrend line continues to dominate the chart. Bears may have lost a couple of recent battles, but can regroup and fight back at any time.

Weekly technical indicators are showing upward momentum, but haven't quite turned bullish yet - except Slow stochastic, which has crossed above its 50% level. MACD has crossed above its signal line in negative zone. ROC and RSI are in neutral zones.

If the rally continues, expect resistances from the 50 week EMA, the 7950 level and the downtrend line. Any dip towards 7240 can be used as a buying opportunity.

Nifty closed almost 500 points above its rising 200 week EMA (not shown) in a long-term bull market. The scale is gradually tilting towards bulls.

Bottomline? Chart patterns of Sensex and Nifty have managed to close above long-term 'support/resistance' levels. Some correction or consolidation can be expected. Use any dips to enter fundamentally strong stocks. Long-term bull markets are gradually recovering from year-long corrections.

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