NSESI Bullish Head and Shoulder Pattern Emerges

NSEASI Daily chart

Market Sentiment:                                                                       Actionable Points

Long term – Bearish                                                                        Intermediate Resistance: 31,256.16 bps
Mid-term – Neutral                                                                         Support: 28,053.16 bps
Short term – Bullish (Mid-accumulation phase)

The opening week in the trading month suffered decline as the NSE All Share Index fell by 1.38% to close at 30,165.22 basis point. The month of September 2015 witnessed a bullish month as market participants were bullish as seen in the monthly chart. Also the index finds support at critical level 28,053.16 basis points with the monthly timeframe indicating the price momentum hovering around the 50% Fibonacci retracement level of the downtrend (reference the special monthly report release on 1^st October, 2015)

Technical Profiling:

With the longer term timeframe bias still negative, the shorter term timeframe (daily chart analysis) is indicating a mid accumulation phase*. This is evidence in the formation of a bullish head and shoulder pattern (reversal pattern). The Index formed a left shoulder on 31/07/2015 reaching a low of 30,050.12 bps with volume traded at 1,268m while the head formed on 27/08/2015 touching a low of 28,053.16 bps on traded volume of 1,332m, finally on 08/10/2015 the index reached a low of 29,979.90bps on traded volume of 219m. The momentum indicator RSI 14 day period slightly trades below the 50 level while the 20EMA trades above the price action.

Technical Implication:

Downward momentum loosing steam as the uptrend is building momentum, a trend towards the Head and Shoulder neckline at 31,256.16 bps is anticipated in the near term. A breach above the neckline would indicate shift in medium term sentiment to the upside and rally in speculative driven equities that has relative strength. 

*Mid-accumulation phase: Bearish forces become more neutral as buyers methodically accumulates shares, but still no signs of upward momentum develop. Fundamentals remain negative