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Saturday, March 26, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Mar 23, 2016

Activity was expected to be at a low key during a 3-day trading week truncated by Holi and Good Friday holidays. Continued buying interest from FIIs ensured that both Sensex and Nifty gained about 1.5% each on a weekly closing basis.

As per provisional figures, FIIs were net buyers of equity worth nearly Rs 3500 Crores during the week. DIIs were net sellers of equity worth Rs 2600 Crores. Both indices are facing resistances from long-term support/resistance levels.

Stock indices may remain volatile next week due to F&O expiry and financial year end on Thu. Mar 31 '16. Hopes of an interest rate cut by RBI in April and short covering can continue to sustain the market rally from the Feb 29 low.

BSE Sensex chart pattern

The daily bar chart pattern of Sensex has traded above its 20 day and 50 day EMAs for the past 3 weeks. The 20 day EMA has crossed above the 50 day EMA after 5 months. These are short-term bullish signals.

However, after breaking out above the support/resistance level of 24830, the index is facing resistance from the 25450 level. The 200 day EMA is still falling, and the index is trading below it in bear territory.

Bears may put up a fight to defend the 200 day EMA. When - not if - the index moves above the 200 day EMA, expect stronger resistances from the support/resistance level of 26300 and the blue downtrend line.

Three of the four daily technical indicators - MACD, RSI, Slow stochastic - are in their overbought zones. ROC has corrected from its overbought zone, but remains positive.

Some correction or consolidation is likely as the index approaches its 200 day EMA.

On longer-term weekly chart (not shown), Sensex closed above its 20 week EMA for the first time after 5 months. The index is now 1750 points above its rising 200 week EMA in a long-term bull market.

Weekly MACD and ROC are still in negative zones. RSI is in neutral zone. Slow stochastic has crossed above its 50% level. Bulls are gradually gaining ground, but bears haven't given up the fight yet.  

NSE Nifty 50 chart pattern

The weekly bar chart pattern of Nifty 50 closed higher for the 4th straight week. It also managed to close just above the next support/resistance level of 7700, but remains below its 50 week EMA in bear territory.

Bears may try to defend the 50 week EMA. Stronger resistances are likely from the blue downtrend line and the next support/resistance level of 7950.

A change of trend will be confirmed only when the index crosses above the downtrend line convincingly (i.e. supported by a significant increase in volumes).

Weekly technical indicators are showing decent upward momentum. ROC and Slow stochastic have entered bullish zones. MACD has crossed above its signal line in negative zone. RSI is facing resistance from its 50% level.

Nifty closed 600 points above its rising 200 week EMA (not shown) in a long-term bull market. The scale continues to tilt towards bulls.

Bottomline? Chart patterns of Sensex and Nifty are testing long-term 'support/resistance' levels. Some correction or consolidation is a possibility. Use dips to enter fundamentally strong stocks. Long-term bull markets are recovering slowly but surely from year-long corrections.

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