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Saturday, June 25, 2016

BSE Sensex and NSE Nifty index charts – Jun 24, 2016

Global stock markets plummeted after UK voters decided to exit from the European Union by a 52%-48% margin. Interestingly, Scotland and Northern Ireland voted for 'BRemain' while England and Wales voted for 'BrExit'.

That may open the door for Scotland and Northern Ireland exiting from the UK - even as fears of a breakup of the EU is looming large. Such 'doomsday' events may not happen, but investors certainly voted with their feet.

As per provisional figures, FIIs were net sellers of equity in the Indian market worth about Rs 650 Crores - the bulk of the selling occurring on Friday after the 'BrExit' results. DIIs were net buyers of equity worth more than Rs 1050 Crores during the week. 

Sensex and Nifty lost around 1% on a weekly closing basis, but bounced up strongly after receiving support from long-term moving averages.   

BSE Sensex chart pattern


The daily bar chart pattern of Sensex continued its sideways consolidation within a 'symmetrical triangle' pattern for four days - till the 'BrExit' news on Friday caused a breakout from the triangle with a downward 'gap' supported by strong volumes (not shown). 

An upward or downward breakout with a 'gap' is usually considered a stronger breakout than one without a 'gap'. The index dropped below its 20 day EMA, the support level of 26300 and its 50 day EMA to touch an intra-day low of 25911 - losing almost 1100 points from Thursday's close.

The rising 200 day EMA provided good support to the index, which pulled back sharply towards the lower edge of the triangle and closed the week above its 50 day EMA and the 26300 level.

Despite the huge intra-day fall, daily technical indicators are looking mildly bearish. MACD and Slow stochastic are moving down in bullish zones. ROC and RSI have just slipped into bearish zones.

Some more correction or consolidation is likely as the dust settles on the 'BrExit' ramifications and bulls take a little time to recover their poise.

Investors need not rush in to buy or sell. Stick to your asset allocation plans till sanity prevails in the market.

NSE Nifty chart pattern


An extremely overbought TRIN indicator had led to the following remarks in last week's post on the weekly bar chart pattern of Nifty: "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."

The index traded within the 'support-resistance' zone between 7950 and 8275 for the 4th week in a row. Friday's sharp fall after 'BrExit' results hit the market led to an intra-week breach of the 7950 level, but the entangled and rising 20 week and 50 week EMAs provided good downside support.

Weekly technical indicators have started correcting overbought conditions. MACD is moving sideways in positive zone. ROC and RSI have slipped down from their respective overbought zones. Slow stochastic is about to do likewise.

Though NSE TRIN has just emerged from its overbought zone, some more correction or consolidation within the 'support-resistance' zone is expected before Nifty can breakout decisively.

Bottomline? Bears used the unexpected 'BrExit' setback to dent the confidence of bulls and prevent them from regaining control of Sensex and Nifty charts. Bulls may stoop to conquer. Suppress the feeling of being 'left out'. If in doubt, stay out. Whether you enter a couple of hundred points higher or lower won't make much difference to your long-term returns.

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