Mumbai Stock Exchange - Analysing the BSE Sensex Trends

Posted by Nick Niesen on November 8th, 2010

The BSE Sensex is the index of shares listed on the Mumbai Stock Exchange (BSE) and learning how to recognise the trends in the index can yield valuable information about when to buy, when to hold and when to sell, the three main pieces of information needed by every Indian stock market investor.

The performance and trending of the BSE Sensex index of the Mumbai Stock Exchange (Bombay Stock Exchange) is uploaded every day to www.sharesdaily.in where you

will see a number of metrics, the first being the percentage rate of change over the past 1, 5, 10, 60 and 250 trading days.

One often sees the words "short term", "medium term" and "long term" used in the financial media without any actual
definitions. The sharesdaily.in analysis metric defines them thus:

Short term is the market trend over the past ten trading days.

Medium term is the market trend over the past sixty trading days.

Long term is the market trend over the past two hundred and fifty trading days.

From this you can see that it is possible to have the market rising in the short term but falling in the medium term, etc.

When all three terms are showing positive numbers, the market trend is very strong in that direction, be it up or down.

In addition to the previous trends, the percentage rate of change of the previous trading day is displayed plus the movement over the past week of five trading days.

The other valuable metric is the Volatility Barometer, this measures the trading range over the past ten trading days. If the volatility is falling then the market is more stable,

if it is rising then the market is becoming more unstable. An actual numerical readout will be installed in the future.

The ideal condition for investors is to have the short, medium and long term trends in positive numbers and to have the volatility decreasing. Here you have both gain and stability. This applies to the market index and not to every individual stock.

Always remember that this all can be overruled by sudden unpredictable negative events so have your exit strategy and stop losses in place. More about this in future
articles.