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Sunday, December 11, 2016

Sensex, Nifty charts (Dec 09, 2016): bulls assert themselves but bears still on top

FIIs and DIIs were bullish during a week when volume of transactions dipped 17.5%. FIIs were net buyers of equity worth Rs 9.37 Billion; DIIs were net buyers of equity worth Rs 2.97 Billion, as per provisional figures. Both Sensex and Nifty gained about 2% on a weekly closing basis.

The IIP number for Oct '16 was -1.9% - indicating a fall in India's industrial output compared to Oct '15. The IIP number was 0.7% in Sep '16.

The cash crunch following demonetisation of high-value bank notes continues. Shrinking consumer spending may further affect factory output in the next few months.

BSE Sensex index chart pattern

For the past three weeks, the daily bar chart pattern of Sensex has been in a small up trend within a larger down trend. The index is trading in bear territory below its sliding 50 day and 200 day EMAs.

However, there are signs that bulls are beginning to assert themselves. The 20 day EMA is in the process of forming a 'rounding bottom' reversal pattern, and the index has moved above it.

Daily technical indicators are looking bullish. MACD is rising above its signal line in negative zone. ROC is above its rising 10 day MA in positive zone. RSI and Slow stochastic have climbed up to the edge of their overbought zones.

The rally from the Nov 21 low is going to face overhead resistance from the merging 50 day and 200 day EMAs, and the blue down trend line. Expect the up trend line to provide support on any subsequent corrective move.

If FIIs and DIIs continue to join forces, the down trend that started from the Sep 8 top may get reversed soon.

NSE Nifty index chart pattern

The weekly closing chart pattern of Nifty has closed five weeks in a row inside the 'support-resistance' zone between 8000 and 8300.

The battle lines are clearly drawn. A fall below 8000 will be bearish and bring the next support zone between 7500 and 7700 into play. A convincing move above 8300 can lead to a breach of the blue down trend line. 

The index is showing both bullish and bearish signals. On the bullish side, the index has rallied after forming a small 'double bottom' reversal pattern.

On the bearish side, the rally has been on sliding volumes, and is facing resistance from the 50 week EMA.

Weekly technical indicators are in bearish zones. MACD has slipped into negative zone. ROC formed a small 'double bottom' reversal pattern inside its oversold zone but is facing resistance from its falling 10 week MA. RSI and Slow stochastic are hovering near the edge of their respective oversold zones.

Bottomline? Bulls won last week's battle for domination of Sensex and Nifty charts. But bears still have the upper hand in the near term. The stock market is gradually pricing in the negative fallout of demonetisation. "Acche Din" may follow soon. Stay invested.

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