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Sunday, June 12, 2016

BSE Sensex and NSE Nifty index chart patterns – Jun 10, 2016

FIIs were net buyers of equity on all 5 days of the week. Their net buying totalled less than Rs 1500 Crores. DIIs were net sellers of equity worth Rs 925 Crores, as per provisional figures.

Concerns about 'Brexit' led to a global sell off in equity markets during Thursday and Friday. Sensex and Nifty closed less than 1% lower for the week.

The IIP number for Apr '16 was a disappointing -0.8%, against a revised figure of 0.3% in Mar '16 and 2% in Feb '16. Industrial growth remains a major challenge for India Inc.

BSE Sensex chart pattern


The daily bar chart pattern of Sensex traded above its three EMAs and the blue down trend line in bull territory for the 2nd week in a row. The 'golden cross' of the 50 day EMA above the 200 day EMA (marked by light blue circle) has technically confirmed a return to a bull market for the index.

Bears are refusing to give up without a fight after dominating the chart for 15 long months. Note that for the past 2 weeks, the index has consolidated within the long-term 'support-resistance' zone between 26300 and 27250.

The index needs to cross above 27250 convincingly for bulls to regain full control over the chart.

Daily technical indicators are correcting overbought conditions. MACD has dropped to touch its rising signal line. ROC has dropped sharply to its '0' line. RSI and Slow stochastic have started moving down inside their respective overbought zones.

Some more correction and/or consolidation within the 'support-resistance' zone is likely. The rising 20 day EMA and the 26300 level may prevent the index from falling too far.

The dip can be used as an adding opportunity, but maintain a stop-loss at 26100 in case global factors lead to a deeper correction.

NSE Nifty chart pattern


For the 2nd week in a row, the weekly bar chart pattern of Nifty failed to overcome resistance from the 8275 level, and formed a 'reversal bar' (higher high, lower close) that often marks an intermediate top.

The index traded well above the blue downtrend line and its two weekly EMAs in bull territory. The 50 week EMA is forming a 'saucer' (rounding bottom) pattern that has bullish implications.

Weekly technical indicators are correcting overbought conditions but remain in bullish zones. MACD is rising above its signal line in positive zone. ROC is showing negative divergence by touching a lower top and slipping below its rising 10 week MA. 

RSI is about to drop from its overbought zone. Slow stochastic is inside its overbought zone. Some consolidation within the 'support-resistance' zone between 7950 and 8275, or a correction towards 7950 is likely.

The 15 months long downtrend has been reversed and a new bull phase is starting. Use dips to add.

Bottomline? Bears are trying to fight back as bulls are slowly regaining control of Sensex and Nifty charts. The onset of monsoon in southern India should provide further incentive to bulls to charge ahead. Brexit concerns may keep global indices in consolidation mode. Pick your stocks carefully. Stay away from penny stocks and unknown small-caps.

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