Saturday, April 30, 2016

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 29, 2016

Trading activity was comparatively low during F&O expiry week. FIIs were net buyers of equity worth Rs 1060 Crores, but they were net sellers on the last trading day of the month. DIIs were net sellers of equity worth Rs 1410 Crores during the week, as per provisional figures.

Sensex and Nifty failed to close above their respective down trend lines for the second week in a row and corrected, but received good support from their long-term moving averages.

Q4 (Mar '16) results are coming in thick and fast, with more hits than misses so far. PSU banks - and even ICICI Bank - have disappointed. If the initial trends are maintained, Q4 results may turn out to be better than Q3 results. 

BSE Sensex chart pattern


The daily bar chart pattern of Sensex faced strong resistance from the blue down trend line and slipped below the 200 day EMA on Fri. Apr 29, but received support from the 20 day EMA and bounced up to close just above the 200 day EMA.

The following comments were made in last week's post: "Sensex had formed an upward 'gap' between 25180 and 25358 on Wed. Apr 13. The current level of the rising 20 day EMA is within the 'gap' zone, and is likely to provide support if the index corrects some more."

Bears were expected to put up a fight to defend the down trend line - like they did in Jul, Aug & Oct '15. Just above the trend line is the 26300 level, which is a long-term 'support-resistance' level. So, bulls have their work cut out.

Daily technical indicators are in the process of correcting overbought conditions. MACD is about to cross below its signal line and drop from its overbought zone. ROC has dropped from its overbought zone. RSI is trading sideways just below its overbought zone. Slow stochastic is poised to fall from its overbought zone.

Some more correction looks likely. The rally from the Feb 29 low was quite sharp. The correction will improve the technical 'health' of the chart and provide a buying opportunity.

Expect support from the 'gap' zone (between 25180 and 25358) and the rising 50 day EMA. 

There is also a possibility of the index bouncing up and crossing above the down trend line next week. But the bounce may not be strong enough to cross 26300.

On longer term weekly chart (not shown), Sensex has formed a 'reversal' bar (higher high, lower close) and closed below its 20 week EMA, but is trading more than 1900 points above its rising 200 week EMA in a long-term bull market. 

NSE Nifty chart pattern


The weekly bar chart pattern of Nifty crossed above the blue down trend line and the resistance level of 7950 for the second week in a row, but failed to close above them.

The index dropped to seek support from its 50 week EMA and closed above it. In the process, the index formed a 'reversal week' bar (Higher high, lower close) that can lead to a correction.

Weekly technical indicators are giving mixed signals. MACD is rising above its signal line, but has not entered positive zone yet. ROC has dropped down from its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic is rising inside its overbought zone.

NSE TRIN (not shown) is near the upper edge of its overbought zone after bouncing up from the lower edge - hinting at some more correction.

Bottomline? Chart patterns of Sensex and Nifty failed to overcome strong resistances from their respective blue down trend lines for the second week in a row. Some more correction or consolidation is possible. Be stock specific, and check Q4 (Mar '16) results before buying.

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