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Saturday, April 2, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 01, 2016

Fiscal year 2015-16 was a big disappointment for long-term investors. After touching lifetime highs in Mar '15, both Sensex and Nifty entered down trends that are still in force - wiping out gains made during the previous fiscal year.

Both indices touched 52 week lows in Feb '16 before recovering strongly on the back of huge buying by FIIs during Mar '16. FIIs were net buyers of equity worth Rs 24200 Crores during the month, which was their highest net buying figure since Mar '14.

DIIs turned net sellers of equity (worth Rs 16900 Crores) for only the second time during the past 14 months. That prevented both indices from crossing above important long-term moving averages.

Auto sales during Mar '16 were encouraging. Maruti (15%), M&M (20%), Ford (44%) and Hero Moto (14%) showed double-digit YoY growth for the month. Hyundai grew 4%. Tata Motors grew only 1%, but their commercial vehicle sales grew 20%.

BSE Sensex chart pattern

The daily bar chart pattern of Sensex traded above its 20 day and 50 day EMAs for the 4th week in a row, and rose to touch an intra-day high of 25480 on Thu. Mar 31 but could not stay above the 25450 level for long.  

Bears were expected to put up a fight to defend the 200 day EMA, and they did. The index closed about 68 points lower for the week.

Despite heavy buying by FIIs during Mar '16, the index is trading below the blue down trend line and its 200 day EMA in bear territory.

Expect stronger bear activity if RBI maintains status quo on interest rates next week, because the stock market appears to have discounted a 25 bps (0.25%) cut in the repo rate.

Daily technical indicators are looking bullish but showing negative divergences by failing to touch new highs with the index. Expect some correction or consolidation prior to Q4 results season.

On longer term weekly chart (not shown), Sensex formed a weekly 'reversal bar' (higher high, lower close) but remains more than 1650 points above its rising 200 week EMA in a long-term bull market.

Weekly technical indicators are showing upward momentum, but MACD is still in negative zone and RSI is in neutral zone.

NSE Nifty chart pattern

The weekly bar chart pattern of Nifty closed marginally lower for the week after 4 straight weeks of gains. Effective Apr 1, addition of the Tata Motor DVR stock means that the index now has 51 stocks. 

Bears exerted strong resistance near the 50 week EMA. The index formed a weekly 'reversal bar' (higher high, lower close) but closed above its 20 week EMA and the 'support-resistance zone' between 7240 and 7540.

Weekly technical indicators are giving mixed signals. ROC and Slow stochastic are looking bullish. MACD is above its signal line, but in negative zone. RSI is facing resistance from its 50% level and sliding down.

RBI's policy announcement on Apr 5 and Q4 results to be declared from the following week may be keeping market players on tenterhooks. Expect some consolidation or correction.

Nifty closed almost 600 points above its rising 200 week EMA (not shown) in a long-term bull market. 

Bottomline? Chart patterns of Sensex and Nifty faced strong resistances from long-term moving averages. Some more correction or consolidation is likely.  Use any dips to enter fundamentally strong stocks. If stock picking is not your forte, buy balanced fund units. Long-term bull markets are recovering from year-long corrections, but bears are in no mood to give up yet.

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