Sensex, Nifty charts (Jul 10, 2020): bulls looking tired after long rallies

FIIs were net buyers of equity on Mon., Tue. and Thu. (Jul 6, 7 and 9), but were net sellers on the other two days. Their total net selling was worth Rs 6.35 Billion. DIIs were net buyers on Mon., but were net sellers on the next four days. Their total net selling was worth Rs 26.09 Billion. 

Sensex and Nifty each gained 1.5% for the week even as FIIs and DIIs were both net sellers. So, who were the buyers? It was you and me - a sign of 'distribution' by the big boys.

India's IIP (Index of Industrial Production) contracted 34.7% in May '20 - an improvement over 57.6% contraction in Apr '20, reflecting gradual resumption of manufacturing activity.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex spent the entire trading week above its three daily EMAs in bull territory for the first time since Jan '20. However, all may not be well, as the past five weeks of trading has formed a bearish 'rising wedge' pattern. A downward breakout from such a pattern is more likely. 

Daily technical indicators are in bullish zones, but beginning to show downward momentum. MACD is sliding towards its signal line. ROC is about to cross below its 10 day MA. RSI looks poised to slip down from its overbought zone. Slow stochastic has started to move down inside its overbought zone.

All four indicators showed negative divergences by failing to rise higher with the index. A flood of short-term liquidity triggered an index rally of more than 40% from its Mar 24th low. The risk on the upside is increasing. 

There appears to be some thaw in the frozen border relations with China - a country notorious for its 'two steps forward, one step back' approach to its border relations with 14 different countries. Agreeing to form 'buffer zones' inside Indian territory - as per reports - is equivalent to falling prey to China's nefarious designs.

The Covid 19 virus continues to flourish - particularly in cities - as WHO has acknowledged airborne spread. Some factories that had opened up are facing a spike in new positive cases. Several hundred air travellers have been afflicted.

Q1 (Jun '20) results are expected to be a disaster. With FIIs and DIIs in sell mode, the rally from the Mar '20 low may have run its course. There may not be a sharp crash. A more gradual consolidation-cum-downward slide is likely.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty formed a 45 points upward 'gap' to hop above its 50 week EMA, and closed above its three weekly EMAs for the first time since Feb 20th, gaining 160 points (1.5%) on a weekly closing basis. Bulls need to be wary, as the 'gap' can turn out to be an 'exhaustion gap'.

The index has moved 200 points above the 61.8% Fibonacci retracement level of 10550. However, it failed to close above the 76 points downward 'gap' that formed in the week ending on May 13th - though the 'gap' was filled.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside bearish zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI is slowly rising above its 50% level. Slow stochastic is well inside its overbought zone, but its upward momentum has stalled. 

Nifty's TTM P/E has moved up to 28.27, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone, and can limit near-term index upside.
 
Bottomline? Ongoing rallies on Sensex and Nifty charts have overcome important resistance levels. Short-term liquidity flows gave bulls the upper hand. Now there are signs of 'distribution' from strong to weaker hands. Corrective moves can happen at any time.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Aug 14, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 has been consolidating sideways within a ‘rectangle’ pattern since Feb ‘15. Rectangles are usually continuation patterns, but can also act as reversal patterns at market tops (or bottoms).

Strong volumes on recent down-days is a sign of ‘distribution’. That increases the probability of a downward break out below the ‘rectangle’.

The index closed above all three EMAs on Mon. Aug 10. On Wed. Aug 12, the index dropped below its 200 day EMA to touch an intra-day low of 2052 but bounced back quickly with good volume support. The index gained 14 points on a weekly closing basis, but failed to close above its 20 day and 50 day EMAs.

Daily technical indicators are in neutral zones, which means the consolidation within the ‘rectangle’ may last a while longer. MACD is just inside its negative zone. RSI is marginally below its 50% level. Slow stochastic is slightly above its 50% level.

Technically, the index is in a bull market because it has closed above its rising 200 day EMA. As long as the index consolidates within the ‘rectangle’, it keeps providing good trading opportunities. Investors should wait for an eventual break out from the ‘rectangle’ to initiate any buy/sell decision.

On longer term weekly chart (not shown), the index bounced up after receiving good support from its 50 week EMA and closed above all three weekly EMAs in a long-term bull market. The 20 week EMA seems to be forming a bearish ‘rounding top’ pattern – which could lead to a deep correction if not a change of trend. Weekly technical indicators are in bullish zones but not showing any upward momentum.

FTSE 100 Index Chart

The daily bar chart pattern of FTSE 100, which has been consolidating sideways within a ‘symmetrical triangle’ pattern for the past 2 months, dropped to test support from the lower edge of the triangle. On a weekly closing basis, the index lost 2.5%.

The following comments were made in last week’s post: “A ‘symmetrical triangle’ is usually a continuation pattern. So, a downward break out from the ‘triangle’ is likely.” The index closed exactly on the lower edge of the triangle – temporarily preventing a downward break out.

Why ‘temporarily’? Because strong downward momentum visible on the three technical indicators is suggesting a downward break out and a test of the Jan ‘15 low of 6300. The index has closed below all three EMAs in bear territory.

On longer term weekly chart (not shown), the index closed well below its falling 20 week and 50 week EMAs but closed above its 200 week EMA, and technically remains in a long-term bull market. Weekly technical indicators are in bearish zones and showing downward momentum.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jul 24, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 rallied past its Jun 22 top of 2130 to touch an intra-day high of 2133 on Jul 20, but fell just short of its lifetime high of 2135 (touched on May 20 ‘15).

Bears mounted a strong attack. The index crashed below its 20 day and 50 day EMAs and closed just below the 2080 level. Though the index is trading above its rising 200 day EMA in a bull market, last week’s strong down-day volumes is a sign of distribution.

The level to watch is the Jul 7 low of 2044. A convincing drop below may lead to a test of the Feb 2 low of 1981.

Daily technical indicators are turning bearish. MACD has dropped from its overbought zone. So has Slow stochastic. RSI has crossed below its 50% level. All three indicators are showing strong downward momentum, hinting at a continuation of the corrective move.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA but is trading above its rising 50 week and 200 week EMAs in a long- term bull market. However, the 20 week EMA may be forming a bearish ‘rounding top’ pattern.

Weekly technical indicators are giving mixed signals. MACD is falling below its signal line in positive zone. RSI has slipped below its 50% level. Slow stochastic has crossed above its 50% level. Strong volumes on down weeks is a sign of distribution. Caution is advised.

FTSE 100 Index Chart

The daily bar chart pattern of FTSE 100 had a brief sojourn in bull territory by closing above all three EMAs on Jul 16 and Jul 20. But the index failed to close above the support-resistance level of 6800.

Bears got encouraged to mount a vicious attack that sent the index plunging below all three EMAs and the 6600 level into bear territory. Good volumes (not shown on chart) during last week’s fall mean bears are in no mood to relent. A test of the Jul ‘15 low of 6430 is on the cards.

Daily technical indicators are looking bearish. MACD is falling towards its rising signal line inside negative zone. RSI has dropped below its 50% level. Slow stochastic is about to cross below its 50% level.

The bearish pattern of ‘lower tops and lower bottoms’ from the lifetime high of 7123 (touched on Apr 27 ‘15) continues.

On longer term weekly chart (not shown), the index dropped sharply below its 20 week and 50 week EMAs but closed above its 200 week EMA, and technically remains in a long-term bull market. Weekly technical indicators are in bearish zones.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – May 29, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 oscillated about its 20 day EMA, received good support from its rising 50 day EMA; but closed below its 20 day EMA in a holiday-shortened trading week. The index lost about 1% on a weekly closing basis.

Strong volumes on Fri. May 29, which was a down day, may be a sign of 'distribution'. The index is trading above its 50 day EMA and well above its 200 day EMA, so there is no immediate threat to the bull market.

However, daily technical indicators are showing downward momentum, and beginning to turn bearish. MACD has crossed below its signal line in positive zone. RSI has slipped below its 50% level. Slow stochastic has dropped from its overbought zone, and is falling towards its 50% level.

Some more correction can not be ruled out.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing a bit of downward momentum.

FTSE 100 Index Chart

The daily bar chart pattern of FTSE 100 corrected below its 20 day and 50 day EMAs and the 6950 level on Tue. May 26. It rallied during the next two days, but on decreasing volumes. On Fri. May 29, the index touched its week's high of 7070, but formed a 'reversal day' bar and closed below its 20 day EMA and the 7000 level.

Strong volumes (not shown on chart) on Fri. is probably a sign of 'distribution' from stronger to weaker hands. At the time of writing this post, the index has regained the 7000 level and is trading above its three EMAs in a bull market.

Daily technical indicators are giving mixed signals. MACD is touching its signal line in positive zone. RSI is trying to find support from its 50% level. Slow stochastic is falling towards its 50% level.

Expect some consolidation before the index can breakout in either direction.

On longer term weekly chart (not shown), the index is trading above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing downward momentum.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – May 08, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 was in volatile mood last week. It rose to touch an intra-day high of 2121 on Mon. May 4 – falling short of its lifetime high of 2126 touched on Apr 27 – only to drop more than 50 points below its 20 day and 50 day EMAs on Wed. May 6.

By Fri. May 8, the index recovered all its losses during the week to close at 2116, with a marginal weekly gain of 8 points. Note that volumes during the two down-days (Tue. & Wed.) were higher than volumes on the three up-days.

The same story had played out a week ago. Volumes during the three down-days (Mon., Wed., Thu.) were higher than volumes on the two up-days. This is a sign of ‘distribution’ – from stronger to weaker hands.

Daily technical indicators are in bullish zones. MACD has moved up to touch its sliding signal line. RSI is oscillating about its 50% level without showing any clear direction. Slow stochastic has moved up sharply above its 50% level after dropping below it.

All three EMAs are rising, and the index is trading above them. But lower volumes on up-days raises serious concerns about the sustainability of the long-term bull market.

On longer term weekly chart (not shown), the index received good support from its rising 20 week EMA, and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but not showing much upward momentum.

FTSE 100 Index Chart

During a holiday-shortened trading week, the daily bar chart pattern of FTSE 100 touched an intra-day high of 7053 on Tue. May 5 but closed 126 points lower. By Thu. May 7, the index dropped another 117 points to an intra-day low of 6810, but recovered all its losses to close at 7047 by Fri. May 8 with a sharp spike in volumes – gaining about 60 points for the week.

Daily technical indicators are in bullish zones. MACD bounced up from its ‘0’ line, but is below its falling signal line. RSI has crossed above its 50% level. Slow stochastic has climbed sharply from its oversold zone.

All three EMAs are rising, and the index is trading above them in a long-term bull market. But bears appear to be quite active – using every rise to sell. Stay invested, but remain cautious.

On longer term weekly chart (not shown), the index dropped below its rising 20 week EMA, but is trading above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but not showing any upward momentum.

WTI and Brent Crude Oil charts: counter-trend rallies?

WTI Crude chart

The 1 yr daily bar chart pattern of WTI Crude oil shows a spirited rally by the bulls that propelled oil’s price above all three EMAs and into bullish territory. After bouncing up from the 86 level, oil’s price has formed a bullish pattern of higher tops and higher bottoms.

However, the volumes on down days continue to be very strong, which is an indication that bears are selling at every rise. Oil’s price touched a slightly lower top at 97, and needs to move past 98 for the rally to sustain.

Daily technical indicators are bullish, but showing signs of weakness. MACD is above its signal line in positive zone, but its upward momentum is slowing down. RSI is falling towards its 50% level. Slow stochastic is about to drop down from its overbought zone.

New sources of oil across North America are going to keep oil prices subdued for the next few years, as per this article.

Brent Crude chart

The 1 yr daily bar chart pattern of Brent Crude oil rallied up to its falling 50 day EMA, faced resistance and has dropped back below all three EMAs. The bears are missing no opportunities to sell on rallies. Strong volumes on down days is a sign of ‘distribution’.

Daily technical indicators are turning bearish. MACD rose above its signal line in negative territory, but has started to turn down. RSI has slipped below its 50% level. Slow stochastic has dropped down from its overbought zone.

The down move is likely to resume.

Stock Chart Pattern - Bharti Airtel (An Update)

In the previous update of the stock chart pattern of Bharti Airtel posted on May 25 ‘11 (marked by grey vertical line on the chart below), negative divergences in the technical indicators – which failed to touch new highs with the stock’s price (marked by blue arrows) – led to the following concluding comments:

“The stock chart pattern of Bharti Airtel is back in bull territory, but not yet out of the woods. Without a doubt, this is the best stock among the telecom service providers. But its glory days are behind it. As an investor, you always have choices. If you are going to invest in a slow growth, stalwart stock – would ITC or Dabur be better bets?”

If you are a die-hard fan of Bharti Airtel’s stock, you probably ignored my suggestion of a switch to ITC or Dabur. You may be suffering the consequences if you failed to sell when the stock hit its peak exactly a year ago. Incidentally, both ITC and Dabur would have been good candidates for a switch. While Bharti has lost 19% till date from its closing price of 369 on May 25 ‘11, ITC’s stock has gained 38% and Dabur’s stock gained a more modest 12%.

To grow one’s wealth, some times tough choices need to be made – specially when it involves getting rid of a hitherto outstanding performer in your portfolio. Many small investors must have faced a similar choice with the Infosys stock.

 

Despite the negative divergences marked in the daily bar chart pattern of Bharti Airtel, the stock kept rising for the next two months after my previous post and touched a two year high of 444.70 on Aug 1 ‘11. But it turned out to be a high volume ‘distribution day’ (open near day’s high and close near day’s low) that marked the end of a 14 months long bull rally. A small ‘rising wedge’ bearish pattern was formed as the stock touched its peak.

The subsequent bear phase in the stock’s price has completed a year. By touching an intra-day low of 280.10 on May 23 ‘12, the stock retraced 86% of its previous rally from the low of 254 (touched on Jun 2 ‘10). The ‘death cross’ of the 50 day EMA below the 200 day EMA in Dec ‘11 (marked by light blue oval) technically confirmed a bear market. The stock is trading below its falling 200 day EMA and the blue down trend line.

Technical indicators are bearish. MACD is falling below its signal line in negative territory. ROC is negative and below its 10 day MA, but trying to rise. RSI is moving sideways below its 50% level. Slow stochastic has entered its oversold zone.

Bottomline? The stock chart pattern of Bharti Airtel is falling deep into a bear market – touching lower tops and lower bottoms. The stock hasn’t found a bottom yet. There is no point in trying to catch a falling knife. If it falls below 280, it can test its Jun ‘10 low of 254. Avoid, till the stock price makes a reversal pattern. The company is under scrutiny by regulatory authorities for huge tax evasion.

Brent Crude chart pattern: Oil falls down

In a post a month back about the 2 years weekly bar chart pattern of Brent Crude, the possibility of a fall in oil’s price was mentioned because both fundamentally and technically the price rise seemed unsustainable. The following observation was made: “The levels to watch are 98, 112 and 128. A fall below 112 and/or 98 will be bearish. A rise above 128 will be bullish.”

In a subsequent update, the daily bar chart pattern of Brent Crude showed a break down below a ‘descending triangle’ reversal pattern. Support for the falling price was expected around 113-114 level. Let us take a look at the 6 months bar chart pattern of Brent Crude oil:

Note that the break down below the ‘descending triangle’ (and the 50 day EMA) was followed by a pullback to the lower edge of the triangle. Such pullbacks provide selling opportunities. Oil’s price dropped down to 118, and then started consolidating within a bearish ‘flag’ pattern. A ‘flag’ is a continuation pattern. Since it formed when oil’s price fell from a much higher level, the expected break out from the ‘flag’ was downwards. Pretty much textbook technical analysis stuff.

The 20 day EMA has crossed below the 50 day EMA, and both EMAs are falling. This is a bearish sign. The sharp fall below the 200 day EMA was accompanied by a volume spike – which usually indicates distribution (strong hands dumping on to weaker hands). Though oil’s price fell to 110 on an intra-day basis on May 7 ‘12, the price closed within the expected support level between 113-114. Will the support hold, or will oil’s price fall some more?

All three technical indicators are looking bearish, to the point of being oversold. The MACD is falling below its signal line in negative territory. Both the RSI and the slow stochastic have entered their oversold zones. The bulls may try to stage a rally by taking some solace from the positive divergence in the slow stochastic, which touched a slightly higher bottom while oil’s price dropped lower.

Now, a look at Brent Crude oil’s 2 years weekly bar chart pattern for a different perspective:

The longer-term chart appears to have formed a bearish ‘double-top’ reversal pattern. The pattern will get confirmed only if oil’s price falls below 98, which is the lowest price between the two tops (at 127-128 - one in Apr ‘11 and the other in Feb-Mar ‘12).

All three technical indicators touched lower tops during Feb-Mar ‘12 while oil’s price reached a slightly higher top. The combined negative divergences had hinted about a likely correction. The MACD is positive, but has crossed below its signal line. Both the RSI and the slow stochastic have dropped below their 50% levels. The correction in oil’s price isn’t over yet.

Note that the 200 week EMA is rising and the 20 week and 50 week EMAs are still well above the 200 week EMA. The long-term bull market in oil’s price is intact. However, a price drop to test support from the rising 200 week EMA is a possibility.

Stock Chart Pattern - DLF Ltd. (An Update)

The previous detailed update to the technical analysis of the stock chart pattern of DLF Ltd. was posted more than two years back (date marked by the grey vertical line on the chart below). A further update since then had not been considered necessary because there wasn’t anything new to add to the following recommendations:

“The stock chart pattern of DLF Ltd. does not hold out much hope for the bulls. If you are still stuck at higher prices, continuing to hold may increase your losses. Investors should not go anywhere near this stock.” 

So, why take a re-look at the DLF Ltd. chart now? The motivation came from the considerable interest generated by a recent report published by a Canada-based equity research house that tore the company’s business practices and financial condition to shreds. That report was based on fundamental analysis. But technical signals had warned of the decimation in the stock’s price back in Oct-Nov ‘09.

The weekly bar chart pattern of DLF Ltd shows the steady fall from the 3 yr high of 491, touched in Oct ‘09. The stock fell almost 65% to its Jan ‘12 low of 173. But that pales in comparison to the 90% fall from its all-time high of 1225 touched on Jan 15 '08 to the bottom of 124 on Feb 4 '09.

The subsequent rally led to a 300% gain (from 124 to 491) but retraced only a third of its bear market fall – less than the Fibonacci retracement level of 38.2%. That means the entire gain from 124 to 491 was a bear market rally within the long-term bear market that started from Jan ‘08. Hence the call to investors not to go anywhere near the stock. Very few stocks manage to recover from a 90% fall.

Note that the stock price formed a ‘reversal week’ pattern (higher high, lower close) when it touched 491 in Oct ‘09. A ‘distribution week’ pattern (high near open, close near low on higher volumes) followed the next week. The stock price then entered a bearish ‘rising wedge’ pattern.

After the expected break below the ‘rising wedge’, the stock dropped to 251 in May ‘10 but formed a ‘reversal week’ pattern (lower low, higher close) that marked the end of the first phase of the down move. A counter-trend rally took the stock price above the 20 week and 50 week EMAs to a high of 397 in Oct ‘10. Again, a ‘reversal week’ pattern (higher high, lower close) marked the end of the intermediate rally.

The next leg of the down move dropped the stock to a low of 173 in Aug ‘11. A bounce saw the stock price reach a high of 251 in Nov ‘11 before falling back to test the low of 173 in Jan ‘12. A rally along with the broader market took the stock to a high of 261 in Feb ‘12, when another ‘reversal week’ pattern ended the brief rally. Note the negative divergences in three of the four technical indicators (marked by blue arrows) that warned of a correction, which started even before the adverse report hit the market.

The weekly technical indicators are turning bearish. If the stock breaches its recent low of 173, it can drop all the way to test its Feb ‘09 low of 124. If you are holding the stock, ask yourself: Why?

Bottomline? The stock chart pattern of DLF Ltd. is in a long-term bear market that started more than 4 years ago, and shows no sign of ending. After years of financial shenanigans and taking customers and investors for a ride, the chicken are coming home to roost. The company is desperately trying to sell-off assets to survive, but are finding few takers. The stock doesn’t deserve to be an index constituent. AVOID.

Gold and Silver chart patterns: bears fight back

Gold Chart Pattern

Gold’s chart pattern shows a strong fight back by the bears, just when all seemed lost. After moving above the 1770 level, gold’s price consolidated a bit before rising to a 2 months high of 1790. Proximity to the Nov ‘11 top of 1800 was used as an excuse by the bears to indulge in heavy selling.

Note that all three technical indicators touched lower tops as gold’s price reached a 2 months high. The negative divergences warned of an impending correction. But the high volume of selling marked a ‘distribution day’ (high near the opening level and a much lower close). Such high volumes were last seen during the sell-off in Sep ‘11. Volumes on down days (red volume bars) have exceeded volumes on up days (grey volume bars) on several occasions, and is a sign of distribution.

Gold’s price has dropped below its 20 day and 50 day EMAs, and it looks like it may drop further to its 200 day EMA. The technical indicators are looking bearish. The RSI has slipped below its 50% level. The MACD is still positive, but is falling below its signal line. The slow stochastic bounced up a bit from the edge of its oversold level, but it looks like a ‘dead cat bounce’.

Gold is still trading above its rising 200 day EMA – which means it is technically in a bull market. Hold, with a strict stop-loss at 1650.

Silver Chart Pattern

Silver’s chart pattern shows strong buying by the bulls in the third week of Feb ‘12 that pushed the price above the 37 level. High volume selling and a ‘reversal day’ pattern (higher high and lower close) marked the end of the intermediate rally from the Dec ‘11 low of 26.

The technical indicators are looking bearish. The RSI has dropped from the overbought zone to its 50% level. The MACD has crossed below its signal line, and is barely positive. The slow stochastic has fallen below its 50% level from its overbought zone.

Despite spending more than a month above the 200 day EMA, a bull market was not confirmed technically because the ‘golden cross’ of the 50 day EMA above the 200 day EMA didn’t occur.

Silver’s price is likely to fall below its 200 day EMA, and return to a bear market after a foray into bull territory. Sell.

Stock Chart Pattern – SpiceJet (An Update)

What a difference a year can make! In the previous update to the analysis of the stock chart pattern of SpiceJet, I had mentioned about some fundamental changes in the company. The two most important ones were the replacement of financier Wilbur Ross by Kalanithi Maran of Sun TV fame (or, should I say notoriety?), and the departure of senior management personnel including CEO Sanjay Aggarwal.

Technically, the chart pattern was in a bull market – a long consolidation within a rectangle was followed by high volume break out to a new high of 79 – with a 100% gain in less than a year. A correction had ensued, but I had expected the stock price to recover and test its Jan ‘08 peak of 105. The analysis was concluded with the following notes of caution:

”Keep a trailing stop-loss and ride the bull. But remember that experienced airline hands have left the organisation. The new owners have political clout, which is great for wheeling and dealing but not so great for success in a complex and competitive industry which requires constant capital infusion, and globally doesn’t make much money.”

A look at the one year bar chart pattern of SpiceJet should convince readers that my warning was appropriate:

The stock couldn’t cross the 100 mark, reaching a top of 97.45 on Nov 8 ‘10 – which turned out to be a high volume ‘distribution day’ (a higher high but a close near the day’s low opening price). The subsequent correction took the stock price below the 50 day EMA, followed by a good recovery to a lower top of 92.70 on Dec 6 ‘10 – which turned out to be another high volume ‘distribution day’. That was the signal for bulls to exit.

A quick drop to the rising 200 day EMA was followed by a milder upward bounce and then a drift down to the 200 day EMA where the stock spent several trading sessions. The decisive break below the 200 day EMA on Jan 27 ‘11 led to increasing volumes as the stock dropped to the support level of 49 (the lower edge of the rectangular consolidation zone between Dec ‘09 and Jul ‘10).

Note the huge spike in volume as the stock breached the support of the 49 level (marked by the blue arrow) on Feb 7 ‘11. The high volume was a signal that the breached support would become a strong resistance. Shortly thereafter, the 50 day EMA crossed below the 200 day EMA (marked by the light blue oval) – the ‘death cross’ formally confirming a bear market. A pull back to the 49 level culminated with an intra-day breach on Feb 17 ‘11 – which was a ‘reversal day’ that provided another opportunity to sell.

Two more attempts at a pull back to the 49 level in Apr ‘11 were thwarted by the falling 50 day EMA. The stock has been dropping deeper into a bear market, touching a 2 year low of 19.30 on Aug 19 ‘11 that was an 80% correction from its Nov ‘10 peak of 97.45. The technical indicators are showing bullish signs, but it is a bear market rally that may attract more selling.

There is a well-known joke about the airline industry: If you want to become a millionaire in the airline business, you should start with a billion. Vijay Mallya’s Kingfisher Airlines is a classic example. SpiceJet is no exception – except for the brief period when the Ross-Aggarwal team was at the helm. The number of air-passengers are increasing day-by-day. That doesn’t mean that the business is a profitable one.

Bottomline? The stock chart pattern of SpiceJet is deep within a bear market, and in danger of becoming a penny stock. The DMK’s loss in the recent state assembly elections in Tamil Nadu has negated the considerable political clout of the Marans. Their only hope will be the appearance of a white knight who can bail them out. But don’t count on it. Get out if you are still holding.

BSE Sensex and NSE Nifty 50 Index Chart Patterns – May 06, ‘11

The higher-than-expected interest rate hike by RBI triggered a fresh wave of selling, and all support levels mentioned in last week’s analysis of the BSE Sensex and NSE Nifty 50 index chart patterns fell by the wayside.

The FIIs were net sellers throughout the week. The DIIs were net buyers. Last Friday’s (May 6 ‘11) pullback was mainly due to DII net buying overwhelming FII net selling.

BSE Sensex Index Chart

The bulls may be enjoying their weekend, content that the sharp fall in oil prices should halt the relentless FII selling. The pullback of the Sensex above the upward-sloping trend line is a positive. The higher bottom of 18161 touched on May 5 ‘11 keeps the bullish pattern of higher tops and higher bottoms since the low of 17296 (Feb 11 ‘11) intact. That is another positive.

But a glance at the technical indicators is enough to banish any bullish hopes. The MACD is negative and below its signal line. The ROC is negative and below its 10 day MA. The RSI is trying to emerge from its oversold zone. The slow stochastic is inside its oversold zone. All four indicators reached lower bottoms while the Sensex made a higher bottom. The negative divergences may extend the correction.

Almost forgot to mention (in case you haven’t seen it already) that the Sensex is trading below its 200 day EMA. The ‘death cross’ of the 50 day EMA below the 200 day EMA will confirm a re-entry into a bear market.

Nifty 50 Index Chart

Friday’s pullback in the Nifty 50 chart didn’t quite make it above the upward-sloping trend line, and there is every possibility of the index resuming its down trend next week. In spite of the drop in oil price, twin concerns of inflation and high interest rates are taking a toll on investor sentiments.

Last week, I had mentioned that higher volumes on down days during Apr ‘11 (note the higher red volume bars) was a sign of distribution. The sliding OBV indicator clearly exemplifies distribution.

There are no signs of a turn around in the down trend yet. But the index is indicating oversold conditions, which could lead to a recovery. If oil’s price continues to tumble, India’s fiscal deficit situation will improve. If results of the state elections go in favour of the ruling party at the centre, it could provide a trigger to buy.

Lots of ifs and buts. Shows that the near future is uncertain. Patience and discipline are virtues during such times.

Bottomline? The BSE Sensex and Nifty 50 index chart patterns are on the verge of dropping into bear markets. Long-term investors should keep a close watch on support levels of 17600 for Sensex and 5300 for Nifty. Use Q4 results to short-list stocks for your ‘buy’ list.

Stock Chart Pattern - Bartronics India (An Update)

The reason for analysing the stock chart pattern of Bartronics India back in June 2009 was not because this small investors' and brokers' favourite was looking like a 'good buy'. It was to suggest to existing holders that it was time to say 'good bye' to the stock.

Why? The company is in a supposedly high-tech field with great growth opportunities. Technically also, the chart was looking impressive. But one look at the fundamentals painted a completely different picture. It supports my oft-repeated refrain that a stock should be bought only when the technicals and fundamentals are indicating a 'buy'.

The cash flow from operations for year ended Mar '09 improved considerably over the previous year, but still remained negative. Which means, the 10% dividend and the tax on 'profits' were paid out of borrowed money. No wonder the debt to equity ratio increased from 1.3 to 1.8 and financial expenses zoomed more than 5 fold from Rs 4 Crores to Rs 22 Crores.

That dented the NPM from 17.8% to 12.8%. Prudent management would not have declared a dividend on such worsening financials. May be it was an effort to improve sentiment and keep the stock price high. Guess what? It didn't work.

The 2 years bar chart pattern of Bartronics India shows that the stock has gone nowhere:-

Nine months back, the stock had closed at 165. Today it closed at 150. In between, it peaked at 194 in July 2009, made a trough at 130 in Nov 2009 and fluctuated within the 130-194 band.

The stock has sought support from the 200 day EMA several times and both the MACD (which is in the negative zone) and the RSI (which is below the 50% level) are showing weakness.

Only the OBV is showing positive divergence - moving up while the stock moved sideways. But looks can deceive. What looks like 'accumulation' is actually 'distribution'. Why? A look at the shareholding pattern will reveal all.

The Indian promoters (27% holding) and the FIIs (6% holding) have been reducing their holdings while the general public, which now holds a whopping 45% of the steadily rising equity capital, have increased their share over the previous two quarters. No better example of stocks moving from strong hands to weaker ones.

Bottomline? The stock chart pattern of Bartronics India and the fundamentals are looking quite weak. Get out before it is too late. Die-hard hopefuls should note the strong resistance zone between 180 and 195. Only a cross above the zone can take the stock to a new high.

How to make money when a market is trending sideways

When a stock market index starts to trend sideways after a sharp up move, it is usually a sign of consolidation. As if the market is stopping a while to catch its breath. The buying pressure eases some what - and that is reflected by lower volumes.

In other words, bears and bulls (read, supply and demand) reach an equilibrium state with neither getting the upper hand. There is no discernible pattern to the daily or weekly moves. This is a frustrating time for investors and traders.

How does one make money in such a sideways trending market? If you are a trader, then you need to identify the support and resistance levels - either for individual stocks, or for an index. Then buy near the support level and sell near the resistance level. Easier said than done.

What if you are a short-term investor? Your nimbleness and investing acumen will be tested. You need to identify sectors or stocks that have not performed great in the bull rally so far. Buy into them, and book profits quickly.

This is a time when savvier players with deep pockets tend to indulge in sector rotation. If it is tea this week, then next week it may be sugar. Banks one week, and metals the next. It may not be possible or feasible to catch each move. So concentrate on a handful of sectors.

For long-term investors, sideways trends need not be very stressful. Most will probably sit this period out, or book partial profits in stocks that were bought at lower prices earlier. This is also a good time to research individual stocks that have strong fundamentals.

By now the market has digested the half yearly results and formed a pretty good idea about the rest of the year. Retail, real estate, textiles, export-oriented industries are still not out of the woods. Infrastructure, capital goods, autos are doing better. Hospitality, travel and tourism are emerging from the doldrums. FMCG, healthcare are down turn proof. Telecom is facing headwinds.

Consolidation periods are usually followed by a resumption of the previous trend. In this case, upwards. Some times, these turn out to be distribution phases and end up with a reversal of trend. A look at the on-balance volume technical indicator can provide clues.

The smart thing to do is not to bet the barn on an upward or downward breakout. That would save one from huge losses. Be patient and track your researched stocks on a regular basis. The stock market always gives opportunities to buy at reasonable, if not cheap, prices. Set realistic targets and book partial profits when you achieve those targets.

Related Posts

About Volume and On-Balance Volume (OBV)

About Support and Resistance levels in stock chart patterns

Stock Chart Pattern - Suzlon Energy Ltd (An update)

The previous analysis of the stock chart pattern of Suzlon Energy was done more than 6 months ago when the stock market was near its nadir. It is time for an update - more so because the stock is back in the news, thanks to a 5% sale of the promoter's stake.

My bias against Tulsi Tanti and his faulty wind mills was laid bare, including a nonsense rhyme from 'Abol Tabol' by Sukumar Ray, in the earlier post. So I will try to refrain from adding insult to injury. But I can't stop myself from asking this question:

'Why and when does a person sell his wife's jewellery?'

If I was a scriptwriter of Hindi movies, I would perhaps come up with a lofty answer - like 'for building low-cost housing for the down-trodden', or, 'for setting up a well-appointed old folks home'. But the logical answer would be:

'When he exhausts all other options to raise money for survival.'

Let us take a look at the 1 year bar chart pattern of Suzlon Energy and find out how the stock has fared in the bull rally:-

The stock was decimated by the bears, falling all the way from a peak of 460 in Jan '08 (adjusted for a 5:1 stock split that changed the face value from Rs 10 to Rs 2) to a low of 33 in Mar '09. A massive 93% fall, that few stocks can survive.

The subsequent sharp rally took the stock up above the 200 day EMA to 146 in Jun '09 - retracing about 26% of the entire bear market fall. A reader had questioned my recommendation to not go anywhere near the stock (though I had suggested that adventurous traders could make a punt, because the 50 day EMA had gone far below the 200 day EMA, indicating oversold conditions).

Smart investors were not fooled by the whopping 340% gain in 3 months from the Mar '09 low, and started booking profits. After managing to keep its head above the long-term average for most of Jun '09, the stock slipped below it in Jul '09. The 200 day EMA has since provided strong resistance to further up moves.

What is more remarkable? Despite the sharp rally, the 50 day EMA - which had moved below the 200 day EMA way back in Mar '08 - has not been able to move above the long-term average. That means, technically, the stock failed to enter a bull market.

Today's (Wed, Sep 23 '09) news about the 5% stake sale has not been well-received by investors. The stock slipped by more than 6%, and closed below both the 20 day and 50 day EMAs. The bears are in control. Every rise can be used to sell.

The technical indicator's are reflecting the weakness in the stock. The RSI is below the 50% level and moving down. The MACD is barely positive, and below its signal line. The OBV is slipping, indicating 'distribution'. The slow stochastic is getting ready to enter the oversold region.

Bottomline? The stock is at a level nearly 3 times higher than where it was 6 months back. But the chart pattern of Suzlon Energy is uninspiring - particularly the volume spikes on down days. A drop to the 75-80 level could be in the offing. A stock every one should avoid.

BSE Sensex Index Chart Pattern - Aug 14, '09

Last week, some bearish possibilities were observed in the BSE Sensex chart pattern. The weakness in the index chart remains, despite the sudden 500 point jump on Thursday, Aug 13, '09. The volumes were lower than on the previous day, which was a 'down day'.

FIIs were net sellers on 4 of the 5 trading days last week. The only day that they were net buyers - which was also the day when the proposed tax reforms bill was made public - the BSE Sensex index jumped up.

Some observations made last week about a 'broadening top' formation, may be worth revisiting:-

'Such a formation is a distribution pattern, where the 'smart money' gets out and the 'weaker hands' (typically MFs and retail investors) jump in, trying not to miss the bus. Volumes tend to be uncertain, and price swings can be quite unpredictable.'

This week, let us look at the 3 months bar chart pattern of the BSE Sensex index that shows the entire post-budget trading:-

The trading pattern of the last 3 months has been confined within a broad range of 13200 to 16000. This consolidation, after a spectacular rise from the bottom of 8000 in Mar '09, has gone on long enough. A break out, either up or down, could happen in the near future.

The broadening top and sudden swings in levels and volumes indicates a possible break down wards. But a flood of liquidity from the FIIs can change the direction of the market and make it move up at least by 4-5%. That will take it to the resistance zone at the 61.8% Fibonacci retracement level of the entire bear market fall.

A small bit of trivia. The current Sensex level is the same as that in July '07 and Aug '08. In between, the index made an all time peak at 21200, and a bottom at 7700. For all the gyrations of the BSE Sensex, and the zillions of words written and uttered on business media, we have made zero progress in 2 years!

This is as good an example as any, that investors should concentrate more on individual stock movements and worry less about the index directions. Over the longer term, all that will count for wealth creation is how well you have selected individual stocks based on fundamental analysis, using Graham's concept of 'Margin of Safety'.

Finally, a look at the technical indicators. The 20 day EMA was broken briefly. The index took support at the 50 day EMA before jumping up above the 20 day EMA, which has flattened. So, the short term trend is neutral; the medium and long term trends remain up.

The RSI is at the 50% level. Likewise for the slow stochastic, but the %K line is below the %D. The MACD is positive, but is below its signal line and moving down. The MFI is below the 50% level and also heading down.

The strong grip of the bulls seems to be slipping. The below average monsoon isn't helping the situation. The bears are fighting hard, yet haven't quite regained control.

Bottomline? The BSE Sensex chart pattern is not inspiring the confidence required for a full-fledged bull market, in spite of the 100% rise from the bottom. Keep booking profits wherever available. Avoid entering questionable or high beta stocks.

BSE Sensex Index Chart Pattern - Aug 07, '09

Before analysing the BSE Sensex index chart pattern, let us flash back a little. Regular readers of this blog may recall that I've been mentioning several bearish possibilities on the horizon, as the index kept making new highs.

A couple of my observations two weeks back were:

1. There is no doubt that the head-and-shoulders pattern had formed. Though the bulls managed to negate it, the underlying weakness that led to the pattern may not have gone away entirely.

2. If the Sensex does cross 15600 and goes to 16000 or so, and then turns back down and makes a low that is lower than 13220, we will get a higher high and a lower low. This would lead to a bearish 'broadening formation'.

During last week's discussion, I had mentioned 'that should the Sensex index fail to cross the 16043-16068 level convincingly and move down sharply again, the bear market from Jan '08 will technically still remain in force!'

Now a look at the 1 year bar chart pattern of the BSE Sensex index will clarify the relevance of the earlier observations:-

The bulls tried valiantly to push the BSE Sensex above the 16000 level. Four days in a row, the 16000 level acted as a stiff resistance. The BSE Sensex failed the final test of a new bull market - crossing the 61.8% Fibonacci retracement level of the entire bear market fall from the Jan '08 top. The bears saw their chance, took back control, and the Sensex shed 3.25% for the week.

A bearish 'broadening top' pattern is in the process of being formed. Such a pattern usually has five small reversals before a larger fall. We have almost a text-book example of the pattern on the BSE Sensex chart. The five reversals have been marked, and they occured on:

1. May 19 - 14930; 2. May 26 - 13525; 3. Jun 12 - 15600; 4. Jul 13 - 13220; 5. Aug 4 - 16002.

Such a formation is a distribution pattern, where the 'smart money' gets out and the 'weaker hands' (typically MFs and retail investors) jump in, trying not to miss the bus.

Volumes (unfortunately, not updated on the chart) tend to be uncertain, and price swings can be quite unpredictable. All the ingredients for the 'broadening top' are in place.

As with any chart pattern (and technical analysis), relying totally on it may not be wise. Past experience says that the low of 13220 (point 4 in chart) should get broken before one can be absolutely sure.

The index halted at its 20 day EMA. The next support is at the 50 day EMA. The final support will be at 13220 and the 200 day EMA. If all three supports fail, the Sensex will finally move down to partially or fully close the 'gap' made on May 18, '09.

The RSI has dropped from the overbought zone and is at its 50% level. The MACD is still positive and above its signal line, but moving down. The ROC is just in the positive zone but also moving down. The slow stochastic dropped from the overbought zone and is still above the 50% level, but the %K line is below the %D line.

Bottomline? The BSE Sensex index chart pattern looks like it is poised for a dreaded (or hoped for) major correction. Do not panic, or act in haste. Keep taking profits wherever available. Or, stay on the sidelines.

How to Profit from the Cup-and-Handle Chart Pattern

An interesting addition to the technical analysis tool set is the Cup-and-Handle chart pattern. It is very much like a bullish 'saucer' or 'rounding bottom' pattern, but provides additional points of entry.

There is no better way to learn about new stock chart patterns than to look at a practical example. I have chosen the 1 year bar chart pattern of Maharashtra Seamless, because it has made a classic, and clearly identifiable, cup-and-handle pattern:-

The stock made a previous high of Rs 328 in Aug '08 before continuing its bear market down move. It finally made a low of 112 in Mar '09, before embarking on a sharp rally with the rest of the market. In the process, it made a 'rounding bottom' bullish pattern.

The stock went all the way up to Rs 325 in Jun '09 - nearly tripling in value from its Mar '09 low. Not unexpectedly, it faced resistance near its previous high, and the first attempt on Jun 5 '09 failed to go past it. Three subsequent attempts on lower volumes also failed.

The stock then entered a corrective downward sloping channel that has taken it towards its 50 day EMA at Rs 250, where it is currently seeking support.

The horizontal line connecting the two tops of Aug '08 and Jun '09 forms the top rim of the 'cup' at Rs 328. The 'rounding bottom' pattern completes the body of the 'cup'. The downward sloping corrective channel is the 'handle' of the 'cup'.

The progress of the 'handle' needs to be closely observed, because it can provide clues to what might happen next. The depth of the cup is a move of Rs 216 (= Rs 328 - Rs 112).

The 'handle' can retrace between a third and a half of the 'cup' depth. That means a retracement of between Rs 72 (=Rs 216/3) and Rs 108 (=Rs 216/2). So, the correction of the 'handle' should stop in the price zone between Rs 256 (=Rs 328 - Rs 72) and Rs 220 (=Rs 328 - Rs 108).

On completion of this corrective move, the stock price should break up wards again. This provides three possible entry points - should you be interested in entering this stock.

1. The first, and riskiest, point of entry is any time the stock goes below Rs 256 - like it has done now. Why riskiest? Because the 'handle' can go below the Rs 220 level and possibly negate any up move for now.

(There are other reasons why you may want to enter now. Rs 250 is a support/resistance level - as can be observed from the chart patterns made in Jul '08 and Sep '08 (supports) and Oct '08 and May '09 (resistances). The 50 day EMA is another likely support. The RSI has entered oversold region.)

2. The second, and less risky, point of entry will be when the stock breaks out upwards from the downward sloping trend line of the 'handle' formation.

3. The third, and safest point of entry will be when the stock moves above the cup rim level of Rs 328.

The Cup-and-Handle stock chart pattern usually shows up as a continuation pattern in a bull phase. In this case, however, it has formed a bottoming pattern. (There are some other stocks that are also showing a similar formation. Curious readers may want to try and find out some of  these stock charts, as an exercise.)

An inverse Cup-and-Handle can form in bear phases or at market tops - as a variation of the rounding-top bearish pattern.

Here are some questions for my readers. What do you think about the 'handle' formation? Why is it happening? Is it an 'accumulation' or a 'distribution' pattern? (Just use your common sense, and provide your answers in the 'Comments' link, or email me directly.)

Related Posts

Stock Chart Pattern - Maharashtra Seamless

Stock Chart Pattern - Sanghvi Movers

How strong is the Relative Strength Index (RSI)?

About Volume and On-Balance Volume (OBV)

I have been writing about the importance of transaction volume for confirmation of stock or index chart pattern moves. Price rise should be accompanied by higher volumes. Price falls should be on lower volumes.

Rising price on static or lower volumes produces a 'negative divergence' - which indicates the rise may end soon. But what if the stock price or index is moving sideways and the volume is going up, or down? Does that have any technical significance for market movements?

Enter the concept of 'On-Balance Volume', a momentum indicator developed by Joseph Granville in 1963. It is calculated on the basis of a rather simplistic assumption about the closing price of a stock, or the closing level of an index:

If the closing price or index level of a particular day is higher than the immediately preceding trading day's, then the entire volume of transactions is added to a cumulative volume total (named On-Balance Volume, or OBV).

If the closing price or index level is lower than the immediately preceding trading day's, then the entire volume of transactions is subtracted from the OBV.

If the closing price or index level of a particular day remains unchanged from that of the immediately preceding trading day's, the OBV also remains unchanged.

What is the significance of this momentum indicator? A rising OBV means accumulation (i.e. the entry of smart-money); a falling OBV means distribution (i.e. stronger hands transferring their holdings to weaker ones).

Why is the calculation of OBV simplistic? A stock or index usually has several up and down movements throughout the trading day. On a higher closing day, the volume of all buy and sell transactions are added to the OBV. Logically, the total volume of all sell transactions should be subtracted from the total volume of all buy transactions before adding to the OBV.

Likewise, for a lower closing day, the difference between the total sell volume and the total buy volume should be subtracted from OBV. When the indicator was developed by Joe Granville, computers were not as readily available or accessible. So to keep matters simple, logic was given short-shrift.

Let us look at an example. What better choice than the BSE Sensex index chart pattern?

During Sept '08 and Oct '08, the OBV followed the Sensex downwards. In Nov '08 and Dec '08 also, the OBV danced together with the Sensex in lock-step.

Now comes the interesting part. See what happened during Jan '09 and Feb '09. While the Sensex fell, the OBV remained flat. A positive divergence, indicating a possible trend change.

Also interesting to observe is what happened when the rally took off during Mar and Apr '09. The OBV made a higher top in Apr '09 when the BSE Sensex index was at around 11000, than when the index was at 16000 in Aug '08. This was a true sign of accumulation.

Unfortunately, this particular charting software doesn't have volume information updated from May '09 onwards.

I would like to thank reader Rajeev for asking a question about accumulation and distribution in the 'comments' thread of this post. It motivated me to write this article.

Related posts

A rectangular Sensex chart pattern

Three phases of a Bear Market

Sensex in a narrow band

A rectangular Sensex chart pattern

In a prior post on July 13, 2008 I had discussed about identifying stock market trends using moving averages. It is time to take a re-look at the current market trend.

After the prolonged bull market that started in May 2003 at about 2900 and took the Sensex all the way up to 21200 in Jan 2008, a  bear market reversal pulled the Sensex down to 7700 in Oct 2008.

We had a clear up trend for close to 5 years - interspersed with several bull market reactions, followed by a sharp down trend for 10 months - with a few bear market rallies.

After the Oct 2008 low of 7700, a swift rally took the Sensex to 10950. Thereafter, the Sensex seems to be meandering sideways with apparently no clearly visible up or down trend.

Let us take a look at the Sensex chart of the past 3 months.

The 200 day EMA is still moving down. The 50 day EMA and the Sensex are well below the 200 day EMA. So we are still firmly in a bear market.

But the Sensex is bouncing along sideways within a rectangular band between 7700 and 10950. Volume of transactions - given in the lower chart - are low. What does this indicate?

A rectangular chart pattern is a period of consolidation before the market makes up its mind where it wants to go. Such indecision amongst bulls and bears typically happens after a sharp move up or down.

A market consolidation - represented by a sideways rectangular chart pattern - can be of three types: accumulation, distribution or continuation.

At market tops the 'smart money', i.e. institutional and high net worth investors, sell. The 'weaker hands', i.e. retail investors and funds, buy. Shares are 'distributed' from stronger to weaker players.

At market bottoms, the opposite happens. The stronger hands 'accumulate' the shares from the weaker investors, who get tired of waiting for the market to move up.

In the middle of a clear up (or down) trend, a consolidation period is called a 'continuation', as the market pauses for breath before continuing the up ward (or down ward) journey.

Since we are not at a market top, this is not a distribution pattern. Is it then a period of accumulation at a market bottom or continuation for a further fall? There lies the conundrum.

The short answer is: we don't know. When and how will we know? Only when the market makes up its mind and decides to either move above 10950 or break below 7700.

Fundamentally, the macro economic situation is showing improvement. Inflation, as indicated by the WPI (Wholesale Price Index) is moving down. Oil prices have fallen drastically in the international market. Interest rates are also coming down.

We are now in the midst of the results season with companies declaring their Q3 or Q4 results for the period Sep to Dec 2008. Consensus amongst the experts is that most companies will declare awful results.

But the market is already expecting (i.e. 'discounting') that and unless there are more Satyam-like skeletons, it is unlikely that there will be a big fall below 7700.

On the day the Satyam scam broke, the volumes were very high and the market dropped 750 points but remained well within the rectangular pattern. The following two trading days also saw high volumes but much smaller falls. These are positives.

So, the scales look slightly tipped towards this pattern being an accumulation rather than a continuation. Why slightly? Because on some of the recent up days, the volume of transactions has been less than on down days. This goes against conventional wisdom of higher volume on up days and lower volume on down days.

If you are a patient investor, wait out this consolidation period. Such patterns can continue for a very long time - months, may be even years.

If you are itching for some action, start putting in small amounts of money in Nifty BeES or any good index fund. I would not rely on stock-picking skills at such a time.