Bullish Pattern Forming in India's SENSEX Index

05/22/2019 9:16 am EST


Suri Duddella

Trader and Author, suriNotes.com

The bullish Cup & Handle formation is forming in the BSE SENSEX Index, according to Suri Duddella expert in technical patterns.

India awaits the parliament election results on May 23. The exit polls suggest the current ruling party BJP (Bharatiya Janata Party) may win the majority and Mr. Modi may continue as the Prime Minister of India.

Indian markets see it as a positive outcome and the Market Volatility in Indian markets may likely to rise as the S&P BSE Sensex index (SENSEX) posted its best opening gains on Monday May 20 since the 2014 elections. The Sensex rallied 70% since Modi's election in 2014. India's corporate valuations are not cheap, yet there are plenty of opportunities in select stocks. The Sensex is up 5.26% year to date. The current SENSEX price is crossing a breakout level in a Cup and Handle pattern (see chart). 

sensex chart

William O'Neil developed the Cup and Handle pattern and it is a bullish continuation pattern. Cup and Handle patterns are a Cup-shaped (bowl) price pattern with consolidation period (handle) followed by a breakout. The Cup & Handle Pattern patterns are usually formed in an uptrend followed by a price breakout as a continuation of the prior trend.

Since the 2014 election (Sensex: 21000) of Prime Minister Modi's government, India's Sensex is trading in an uptrend and reached a peak of 38989 in September 2018 from a low of 23000. In the last eight months, a Cup & Handle pattern was developed in SENSEX as prices started to consolidate prior to the elections with a low of 33291 (cup low). After another consolidation (Handle) period from April 2019 to May 15, 2019, prices appear to be breaking out of the pattern, signaling the elections outcome and continuation of India's growth. The underlying trend indicator (eSIX) may confirm potential uptrend breakout after the election results. The Cup & Handle pattern’s first target range is 42500-43500 and next target level is 44700. 

Find more of Suri’s work at http://www.surinotes.com/

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