Friday, January 23, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Jan 23, 2015

Previous week’s 25 bps interest rate cut by RBI had come as a surprise for the stock market – not because it was unexpected but because the timing of the cut was a month ahead of schedule. Bulls reacted with ‘gap up’ moves out of ‘symmetrical triangle’ consolidation patterns formed on Sensex and Nifty charts.

Another surprise was in store this week. The ECB announced an expected quantitative easing programme, but the quantum was larger and duration longer than what the market had discounted. ‘Gap up’ moves saw both Sensex and Nifty indices touch new lifetime highs.

FIIs have turned strong net buyers of equity. DIIs have turned net sellers. Some of the extra liquidity from Europe is likely to flow to India. A number of PSU divestments planned till Mar ‘15 may act as a brake to the bull charge.

BSE Sensex index chart


The daily bar chart pattern of Sensex hesitated briefly near its Dec ‘14 ‘double top’ at 28809 before climbing and closing above the 29000 level. Since the previous top was crossed with rising volume support (not shown on chart), it may turn into a support level. Technically, the index is within the 3% ‘whipsaw’ limit of the 28809 level. A close above 29675 will validate the break out above 28809.

Daily technical indicators are looking bullish, but a bit overbought. MACD is rising above its signal line towards its overbought zone. ROC is well inside its overbought zone, but its upward momentum has stalled. RSI is hovering near the edge of its overbought zone. Slow stochastic is well inside its overbought zone, but is moving sideways.

In a strong bull market, Sensex can remain overbought for long periods. However, after 7 straight days of rallying, some consolidation or correction may be on the cards. Next week is a holiday-shortened trading week, which also happens to be F&O settlement week. That may slow down bullish activity.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty crossed easily above its previous top of 8627, backed by good volume support. A close above 8890 will give back total control to bulls.

Weekly technical indicators are bullish and looking a bit overbought. MACD has moved up to touch its sliding signal line just below its overbought zone. ROC has crossed above its 10 week MA, and is poised to enter overbought territory. RSI and Slow stochastic have entered their respective overbought zones.

Nifty is trading well above its two weekly EMAs in a long-term bull market.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices have rallied to touch new lifetime highs. Hold on to your portfolios and enjoy the ride. If you are planning to enter now, choose a diversified equity fund or a balanced fund instead of trying your luck with individual stocks. Avoid stocks that appear ‘cheap’.

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