During the week, FIIs were net sellers of equity worth Rs 2.8 Billion as per provisional figures. However, they were net buyers of equity on Tue. Mar 6 and Fri. Mar 9.
DIIs were net buyers of equity worth Rs 1.3 Billion for the week, but they were net sellers of equity on Mon. Mar 5, Tue. and Fri. Sensex and Nifty lost about 2.2% each on a weekly closing basis.
Loan disbursals to India Inc. are taking a hit at this crucial time of fiscal year end as banks have turned defensive in the aftermath of the Punjab National Bank fraud.
BSE Sensex index chart pattern
The following comment was made in last week's post on the daily bar chart pattern of Sensex: "Since the 'triangle' has formed after a correction from the Jan 29 top, the likelihood of a downward breakout is higher."
After receiving support from the lower edge of the 'triangle' on Mon. Mar 5, the index broke out below it the next day and touched an intra-day low of 32991 on Wed. Mar 7 - correcting 9.5% from the Jan 29 lifetime high of 36444.
As often happens after a breakout below a consolidation zone, there was a pullback towards the lower edge of the 'triangle'. But the pullback effort was weak.
Formation of a 'reversal day' bar (higher high, lower close) on Fri. Mar 9 has given bears another opportunity to sell. A test of support from the 200 day EMA and the lower boundary of the 'support/resistance zone' seems imminent.
Daily technical indicators are in bearish zones. MACD is falling below its signal line. ROC is moving sideways below its 10 day MA. RSI has bounced up from the edge of its oversold zone. Slow stochastic is inside its oversold zone.
Note that ROC and RSI touched higher bottoms while the index dropped lower on Wed. Mar 7. The positive divergences probably triggered the pullback. There was no divergence confirmation from MACD or Slow stochastic - which may explain the weak pullback.
Bulls can be expected to defend the 200 day EMA strongly, which in turn can lead to some sideways consolidation within the 'support/resistance zone'. Unless FIIs start buying in a big way, the index is likely to fall below its 200 day EMA.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty broke out sharply below the 'symmetrical triangle' pattern within which it was consolidating for 4 weeks. The index closed below its 20 week EMA for the first time in 14 months.
The 50 week EMA is still rising, and the index is trading above it in a bull market. However, a test of support from the 50 week EMA - and a possible breach - seems on the cards.
Weekly technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. ROC is falling rapidly in bearish zone. Slow stochastic is sliding down in bearish zone. RSI is meandering sideways in neutral zone.
The 50 week EMA (at 10000) is looking vulnerable. Bulls can put up a fight to defend it - leading to some sideways consolidation below the 'triangle'.
Nifty's TTM P/E has moved down to 24.97 - but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone, and can limit index downside.
Bottomline? Sensex and Nifty charts are undergoing bull market corrections. Downward breakouts below 'symmetrical triangle' patterns can lead to deeper corrections. Several IPOs lined up till March-end will divert liquidity from the secondary market. Use a 'sell on rise' strategy in the near-term.
DIIs were net buyers of equity worth Rs 1.3 Billion for the week, but they were net sellers of equity on Mon. Mar 5, Tue. and Fri. Sensex and Nifty lost about 2.2% each on a weekly closing basis.
Loan disbursals to India Inc. are taking a hit at this crucial time of fiscal year end as banks have turned defensive in the aftermath of the Punjab National Bank fraud.
BSE Sensex index chart pattern
The following comment was made in last week's post on the daily bar chart pattern of Sensex: "Since the 'triangle' has formed after a correction from the Jan 29 top, the likelihood of a downward breakout is higher."
After receiving support from the lower edge of the 'triangle' on Mon. Mar 5, the index broke out below it the next day and touched an intra-day low of 32991 on Wed. Mar 7 - correcting 9.5% from the Jan 29 lifetime high of 36444.
As often happens after a breakout below a consolidation zone, there was a pullback towards the lower edge of the 'triangle'. But the pullback effort was weak.
Formation of a 'reversal day' bar (higher high, lower close) on Fri. Mar 9 has given bears another opportunity to sell. A test of support from the 200 day EMA and the lower boundary of the 'support/resistance zone' seems imminent.
Daily technical indicators are in bearish zones. MACD is falling below its signal line. ROC is moving sideways below its 10 day MA. RSI has bounced up from the edge of its oversold zone. Slow stochastic is inside its oversold zone.
Note that ROC and RSI touched higher bottoms while the index dropped lower on Wed. Mar 7. The positive divergences probably triggered the pullback. There was no divergence confirmation from MACD or Slow stochastic - which may explain the weak pullback.
Bulls can be expected to defend the 200 day EMA strongly, which in turn can lead to some sideways consolidation within the 'support/resistance zone'. Unless FIIs start buying in a big way, the index is likely to fall below its 200 day EMA.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty broke out sharply below the 'symmetrical triangle' pattern within which it was consolidating for 4 weeks. The index closed below its 20 week EMA for the first time in 14 months.
The 50 week EMA is still rising, and the index is trading above it in a bull market. However, a test of support from the 50 week EMA - and a possible breach - seems on the cards.
Weekly technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. ROC is falling rapidly in bearish zone. Slow stochastic is sliding down in bearish zone. RSI is meandering sideways in neutral zone.
The 50 week EMA (at 10000) is looking vulnerable. Bulls can put up a fight to defend it - leading to some sideways consolidation below the 'triangle'.
Nifty's TTM P/E has moved down to 24.97 - but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone, and can limit index downside.
Bottomline? Sensex and Nifty charts are undergoing bull market corrections. Downward breakouts below 'symmetrical triangle' patterns can lead to deeper corrections. Several IPOs lined up till March-end will divert liquidity from the secondary market. Use a 'sell on rise' strategy in the near-term.
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