BSE SENSEX Analysis January 2015 (D,W,M)
Created on Thursday, 01 January 2015 01:13
Written by Austin Galt
There appears no end to the massive party thrown by the bulls in Bombay. We’ve seen the main fireworks and now it’s time to get really rowdy with an after party that sees the BSE SENSEX melt up in one last finale performance. Bears won’t be welcome at this shindig!
Let’s begin the analysis with the daily chart and work up from there.
BSE SENSEX DAILY CHART
I have drawn a horizontal line to denote the previous swing low which stems from the October 2014 low at 25910. As long as price remains above this level the uptrend remains intact.
I have also drawn an uptrend line which has held every pullback since. The recent low in December had a good crack at it but was unsuccessful in clearly breaking down below it. So the uptrend remains in a solid position. I suspect price will test this recent low and uptrend line before resuming higher once again.
The lower indicators, being the Relative Strength Indicator (RSI), Stochastic and Moving Average Convergence Divergence (MACD) indicators, are all trending up and looking bullish. There is the potential for some bearish divergences to form on a new high. All in good time.
Let’s now move on to the weekly chart.
BSE SENSEX WEEKLY CHART
The Bollinger Bands show price moving away from the upper band and dipping a bit below the middle band before steadying itself. Price now seems to be finding some support around this middle band which may provide the springboard to bounce back up to the upper band.
I have added a Fibonacci Fan which shows the recent low finding support at the 61.8% fan angle. Price now breaking down below that low would look bearish and likely signal a move to the 76.4% fan angle and probably lower.
The lower indicators, the RSI and Stochastic indicator, are both in no man’s land around the midway mark. This is normal for a correction. If the uptrend is broken shortly then these indicators should both head for oversold territory. I doubt this scenario instead preferring a continuation of the uptrend.
Let’s wrap things up with the monthly chart.
BSE SENSEX MONTHLY CHART
The Bollinger Bands show price moving away from the upper band so it is quite possible that a downtrend starts from here but given the daily and weekly analysis and especially since no previous swing low has been breached I favour price exploding higher from here in a move that attempts to get back to the upper band.
The Parabolic Stop and Reverse (PSAR) indicator, which pertains to the dots, is still showing a bullish bias with the dots underneath price. The dots currently stand at 25588. Breaking below those dots now would likely mean the end of the uptrend. Until that happens………
I have added an Andrew’s Pitchfork which shows the bull trend since the 2009 low generally trading within the lower channel. Price had a crack at trading up into the upper channel back in 2010 but was rejected. I suspect price is now about to have another crack at doing this. The middle pitchfork trend line is currently just below 32000 and I expect price to finally top out a bit below this trend line. Any attempt to get back into the upper trend line should fail if I am seeing it correctly.
The RSI shows the recent top was accompanied by an extremely overbought reading. I’d like to see a new all time high be accompanied by a lower RSI reading thereby setting up a bearish divergence.
The MACD is trending up retaining its bullish bias however the averages do appear to be coming back together. A bearish crossover looks to be on the cards soon.
So essentially I am looking for a big move up from here in the vicinity of 10% which should be the last hurrah for this bull market. This move may last into late February or early March. By that stage the bulls should be drunk and giddy on all the Bombay Sapphire’s that have been consumed. And maybe then the party will finally be over!