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Sunday, April 10, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 08, 2016

FIIs were huge net buyers of equity during Mar '16 - allowing Sensex and Nifty to register sharp recoveries from their 52 week lows touched on Feb 29 '16. It is not a great surprise that they have been in profit booking mode in Apr '16.

During the first 6 trading days this month, FIIs have been net sellers of equity worth Rs 950 Crores. DIIs were also net sellers of equity worth Rs 700 Crores. Both Sensex and Nifty corrected more than 3% from their Mar 31 tops.

Auto sales showed decent growth during the financial year Apr 2015-Mar 2016. Four wheeler sales grew more than 7%. Two wheeler sales grew 3%. Most encouraging was the 11.5% growth in CV sales - showing clear sign of economic growth. 

BSE Sensex chart pattern


Negative divergences visible on technical indicators in the previous post on the daily bar chart pattern of Sensex had triggered the following warning: "Expect some correction or consolidation prior to Q4 results season."

After failing to overcome strong resistance from its 200 day EMA, the index has slipped below its 20 day EMA and is seeking support from its 50 day EMA inside the 'support-resistance zone' between 23840 and 24830.

Daily technical indicators are looking bearish. MACD has crossed below its signal line in positive zone. ROC has dropped inside negative zone below its falling 10 day MA. RSI is seeking support from its 50% level. Slow stochastic has plummeted to the edge of its oversold zone.

Some more correction or consolidation can't be ruled out, but bulls may fight back at any time. The index is trading below its 200 day EMA and the blue down trend line in bear territory. However, market sentiment is definitely more bullish than it was during Jan-Feb '16.

On longer-term weekly chart (not shown), Sensex closed below its 20 week and 50 week EMAs but more than 1000 points above its 200 week EMA in a long-term bull market. Weekly technical indicators are turning bearish.

NSE Nifty chart pattern


The weekly bar chart pattern of Nifty faced strong resistance from its sliding 50 week EMA and closed lower for the second week in a row. The index dropped below its 20 week EMA and tested support from the 'support-resistance zone' between 7240 and 7540 before closing just above it.

Weekly technical indicators are turning bearish and hinting at some more correction or consolidation. 

MACD is moving sideways above its signal line in negative zone. ROC is above its 10 week MA, but about to fall inside negative zone. RSI is sliding down below its 50% level. Slow stochastic is in bullish zone but starting to drift down.

The breadth indicator NSE TRIN is heading towards its oversold zone, but hasn't quite reached there yet.

Despite the correction during the week, Nifty has closed 430 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, and dropped to seek support from 'support-resistance zones'. Some more correction or consolidation is possible. Stick to your asset allocation plans. Check forthcoming Q4 (Mar '16) results before jumping in to buy.

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