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Saturday, June 18, 2016

BSE Sensex and NSE Nifty index chart patterns – Jun 17, 2016

Global concerns regarding Britain's possible exit ('Brexit') from the European Union turned FIIs into bears during the week - though their net selling in equities was worth less than Rs 150 Crores, as per provisional figures.

DIIs were also net sellers of equity worth less than Rs 600 Crores. Sensex and Nifty closed almost flat for the week. Concerns about a delayed monsoon and rising inflation led to bearish market sentiments.

India's exports slipped by 0.8% YoY in May '16. Imports dipped by 13.2%, bringing down trade deficit to $6.3 Billion in May '16 compared to $10.4 Billion in May '15.

For FY 2015-16, the Current Account Deficit (CAD) was 1.1% of GDP against 1.8% of GDP in FY 2014-15. Exports declined by 15.8% and Imports declined by 14.1% during FY 2015-16.

BSE Sensex chart pattern


The following remarks appeared in last week's post on the daily bar chart pattern of Sensex: "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."

As expected, the index consolidated within the 'support-resistance' zone for the third week in a row and received good support from its 20 day EMA and the 26300 level.

Daily technical indicators have corrected overbought conditions and are turning bearish. MACD has crossed below its signal line in positive zone. ROC, RSI and Slow stochastic have slipped into bearish zones.

Some more correction or consolidation is likely till results of the 'Brexit' vote are declared on Jun 24. Those voting for Britain to remain in the Eurozone should win, but global markets may 'sell on news'.

The index is trading above its three EMAs in bull territory, so dips can be used to add. However, there is a possibility that the index may drop to seek support from its 50 day EMA (as it had done 4 times in the past 3 months).

NSE Nifty chart pattern


The weekly bar chart pattern of Nifty traded within a range of less than 150 points and remained within the 'support-resistance' zone between 7950 and 8275 for the third week in a row.

The index is trading above the blue down trend line and its two weekly EMAs in bull territory. The 20 week EMA is about to cross above the 50 week EMA. The 50 week EMA is completing a bullish 'saucer' pattern. Bulls are slowly regaining control of the chart.

However, weekly technical indicators are looking overbought. The market breadth indicator, NSE TRIN (not shown), has dropped to extreme overbought level not seen in the past year.

A correction towards 7950 level is likely. In case 7950 gets breached on the downside, expect strong support from the 20 week and 50 week EMAs.

Bottomline? Bears are using global and local concerns to fight back and prevent bulls from regaining control of Sensex and Nifty charts. It is a losing battle, as bull markets usually climb a 'wall of worries'. Stock selection will be a key. Don't get sucked into sector-rotation - a strategy that 'smart money' appears to be following.

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