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Friday, December 15, 2017

Portfolio Management Tips For Young Investors

Too many young people rarely, or never, invest for their retirement years. Some distant date, 40 or so years in the future, is hard to imagine. However, without investments to supplement retirement income, if any, retirees will have a difficult time paying for life's necessities.

Smart, disciplined, regular investment in a portfolio of diverse holdings, can yield good long-term returns for retirement and provide additional income throughout an investor's working life.

Read more at: 


https://www.investopedia.com/articles/younginvestors/12/portfolio-management-tips-young-investors.asp

Wednesday, December 13, 2017

Nifty chart: a midweek technical update (Dec 13 ‘17)

During the first three days of trading this week, FIIs were net buyers of equity worth Rs 0.8 Billion. DIIs were net sellers of equity worth Rs 8.6 Billion, as per provisional figures. Interestingly, both were net sellers of equity today. Nifty lost 73 points (0.7%).

There has been a setback in India's macroeconomic front. CPI inflation increased to a 15 months high of 4.88% in Nov '17 against 3.58% in Oct '17 due to rising food and oil prices. RBI may have no option but to raise interest rates.

The Index of Industrial Production (IIP) slowed to 2.2% in Oct '17 against an upwardly revised 4.14% in Sep '17 due to a contraction in consumer durable goods production for the second straight month.


The following remarks were made in last week's update on the daily bar chart pattern of Nifty: "Can the index bounce up from here? Technical signals...are conducive, but a sharp rally - like the one during Oct '17 - seems unlikely."

On Wed. Dec 6, the index was testing support from its 100 day EMA (not shown), and did bounce up above its 20 day and 50 day EMAs during the next three trading sessions. 

Bears sold the rise and pushed the index to a close below its 50 day EMA today. By bouncing up after touching an intra-day low of 10033 on Dec 6, a bullish 'flag' pattern has been formed.

Nifty has been consolidating within the 'flag' for the past 5 weeks - after touching a lifetime high of 10490 on Nov 6. Since a 'flag' is usually a continuation pattern, the expected breakout is upwards.

Daily technical indicators are looking bearish and showing downward momentum. MACD and RSI are in bearish zones. Slow stochastic is in bullish zone. Some more correction within the 'flag' is possible.

Nifty's TTM P/E is at 26.1 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - and can limit index downside. 

Bulls seem undecided about the likely outcome of Gujarat state elections. Anything short of a majority for NDA can lead to more index correction.

Nifty is trading above its rising 200 day EMA in a bull market. Dips can be used to add to existing holdings. Buy more on a convincing breakout above the 'flag' - whenever that occurs.

Tuesday, December 12, 2017

Gold and Silver charts: reeling from strong bear attacks

Gold chart pattern


The following comments were made in the previous post on the daily bar chart pattern of Gold: "Slow stochastic has risen towards its overbought zone, and can limit further upside in gold's price...Strong volume bars on recent down days mean bears are not going to yield much further ground without a proper fight."

On Nov 27, gold's price had touched an intra-day high of 1303.40, but slipped down to close just below the 'resistance zone'. The next day, it touched a slightly lower high of 1301.30, but formed a 'doji' candlestick pattern by opening and closing at almost the same level just below the 'resistance zone'.

That was a sign of indecision and weakness that bears exploited to the hilt. Gold's price plummeted below its three EMAs into bear territory, and is trying to form a bottom at 1245.

Daily technical indicators are looking bearish and oversold. More correction can't be ruled out. However, a pullback towards the 200 day EMA can occur at any time. That will provide a selling opportunity.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory.  Weekly technical indicators are showing downward momentum in bearish zones. Slow stochastic has re-entered its oversold zone, and can trigger a pullback.

Silver chart pattern


The following comments were made in the previous post on the daily bar chart pattern of Silver: "..one needs to wait for the eventual breakout (or not) to decide whether to buy, sell or hold. Strong volumes on recent down days mean bears may have a slight edge."

On Nov 29, silver's price broke out below the 'symmetrical triangle' pattern within which it was consolidating during Oct & Nov '17. It then dropped down vertically like a stone to the 'support zone' (between 15.25 & 15.75).

All three EMAs are falling, and silver's price is trading well below them in a bear market. Daily technical indicators are looking bearish and oversold. That can trigger a technical bounce, which will provide bears another opportunity to sell.  

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear marketWeekly technical indicators are looking bearish and showing downward momentum. Slow stochastic is deep inside its oversold zone, and can trigger a pullback.

Monday, December 11, 2017

S&P 500 and FTSE 100 charts (Dec 08 '17): bulls gaining ground

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 continued its gravity-defying rally by touching another new high of 2665 on Mon. Dec 4, but formed a 'reversal day' bar (higher high, lower close). 

That triggered a brief correction down to 2624.75 on Wed. Dec 6. Bulls bought the dip once again. The index closed above 2650 with a small 0.3% gain on a weekly closing basis.

The index is trading above its three rising EMAs in a bull market. Daily technical indicators are in bullish zones. MACD and RSI are looking overbought.

Despite the relentless rise of the index and bull's 'buy the dip' strategy, strong volumes on recent down-days indicate that bears remain active. Smart money is probably booking profits. 

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but formed a bearish 'hanging man' candlestick pattern. Weekly technical indicators are quite overbought. Slow stochastic failed to touch a new high with the index, and can trigger a correction to the rising 20 week EMA. 

FTSE 100 index chart pattern



The daily bar chart pattern of FTSE 100 oscillated about its 200 day EMA during the first four days of trading. By touching an intra-day low of 7289 on Wed. Dec 6, the index formed a small 'double bottom' reversal pattern.

On Fri. Dec 8, the index rose sharply above its 200 day and 20 day EMAs and the 7400 level with a volume surge (not shown) - only to face strong resistance from its falling 50 day EMA. It closed just below 7400, with a gain of 1.3% on a weekly  closing basis.

Daily technical indicators are showing upward momentum. MACD and Slow stochastic are rising in bearish zones. RSI has moved up to its neutral zone. 

A convincing move above the (purple) down trend line is required if bulls wish to shake off bear shackles. (At the time of writing this post, bulls are in the midst of an attempt to do so.)

On longer term weekly chart (not shown), the index bounced up to close just below its 20 week EMA, but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is below its signal line in bullish zone. RSI  and Slow stochastic are in neutral zones, and slowing slight upward momentum.

Sunday, December 10, 2017

Sensex, Nifty charts (Dec 08, 2017): bounce up from support levels but not out of the woods yet

Last week, FIIs were net sellers of equity worth Rs 47.7 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 50.1 Billion.

Sensex gained 417 points (1.3%) and Nifty gained 144 points (1.4%) on a weekly closing basis. Both indices are consolidating sideways with downward biases for the past 5 weeks.

Loan growth of banks hit a 3 years high of 9.6% in Nov '17, against 6.6% in Nov '16 and 9.3% in Nov '15, according to provisional RBI data. Low base effect may have contributed to the higher growth number. Since Oct '17, trend in loan growth to large corporate houses has turned positive.

BSE Sensex index chart pattern



The following comments in last week's post on the daily bar chart pattern of Sensex may be noted: "Some more correction is possible. But bears should not get too enthusiastic. The index is close to the upper edge of the downward-sloping channel, which had provided good support on Nov 15 - and may do so again."

As expected, the index corrected during the first three days of the week to the upper-end of the downward-sloping channel - only to bounce up after receiving good support. 

The index closed above its 50 day EMA on Thu. Dec 7. On Fri., it formed an upward 'gap' of 42 points and closed above its 20 day EMA. So, is the correction-cum-consolidation over?

Not yet. The index needs to cross convincingly above its previous (Nov 28) top of 33770 for bulls to wrest control. Bears may try to prevent that from happening - at least till Gujarat state election results are announced.

Daily technical indicators are showing signs of turning bullish. MACD has stopped falling, and is at its neutral zone. ROC and Slow stochastic have emerged from their respective oversold zones. RSI is rising towards its neutral zone.

If the index continues to rally, resistance can be expected from the zone between 33700 and 33900. 

NSE Nifty index chart pattern



The following comments were made in last week's post on the weekly bar chart pattern of Nifty: "Some more correction can't be ruled out. But proximity to the 'support/resistance zone' between 10100 and 9700 should stall a deeper correction."

The index corrected below its rising 20 week EMA into the 'support/resistance zone' intra-week, but bounced up to close above its three weekly EMAs in a bull market.

For the past 5 weeks, the index has been consolidating within a downward-sloping channel. A convincing upward breakout above the channel will restore control of the chart to bulls.

Weekly technical indicators are in bullish zones. Only ROC is showing upward momentum. MACD, RSI and Slow stochastic are moving sideways.

Nifty's TTM P/E has increased to 26.26 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen sharply from its oversold zone and is hinting at some more index upside.

Bottomline? Sensex and Nifty charts have bounced up from important support levels that were successfully tested three weeks back. Both indices may continue their rally next week, but need to overcome resistance zones.

Saturday, December 9, 2017

A Cautionary View on Future Group stocks

The erstwhile promoter of Pantaloon Retail - a debt-laden company subsequently sold to the Aditya Birla Group - used to be a market darling. 

Aggressive growth at the cost of profits led to his downfall. But you can't keep an ambitious entrepreneur down for long. He reappeared as the promoter of Future Group of companies.

Regular appearances at industry seminars and recent forward-looking statements to various TV channels about becoming one of the leading players in the retail segment had caught my attention.

Two recent articles in moneycontrol.com motivated me to look a little closer at Future Group stocks. The first, published on Dec 7, had a headline: Future Supply Chain IPO subscribed 72% on Day 2.

The second, published on Dec 8, had a headline: Future Consumer Spikes 15%; Morgan Stanley initiates Overweight; sees 61% upside. My mental 'alarm bells' started ringing. Was this article 'planted' to ensure full subscription of Future Supply Chain?

There are already several listed Group companies - Future Enterprises, Future Lifestyle Fashions, Future Consumer, Future Retail, Future Market Networks. Now, Future Supply Chain. What is going on? 

Ambition to succeed is fine - but should it be at the cost of gullible small investors? Future Group can hardly be compared to Tata Group, Birla Group,  Ambani Group or Mahindra Group. So many listed companies seem like a ploy to raise (and siphon off?) money.

Here is a quick look at the fundamentals of Future Group companies (based on Mar '17 annual figures from money.rediff.com):-

1. Future Enterprises: Sales - Rs 3782 Cr; Net Profit Margin - 1.09%; P/E - 59.4
2. Future Lifestyle: Sales - Rs 3877 Cr; Net Profit Margin - 1.18%; P/E - 146.2
3. Future Consumer: Sales - Rs 1645 Cr; Net Profit Margin - 0.46%; P/E - 1359
4. Future Retail: Sales - Rs 17075 Cr; Net Profit Margin - 2.15%; P/E - 67.6
5. Future Market: Sales - Rs 82.5 Cr; Net Profit Margin - (20.8)%; P/E - (36.2)

The five listed companies have a total debt of almost Rs 7000 Cr, and are barely making any profits. How will they service their debt? By raising more equity or, even more debt? The same operating pattern of top line growth at the cost of non-existent bottom line is getting repeated.

Can a leopard change its spots? Caveat emptor.

Friday, December 8, 2017

Bearish Monthly Reversal in EEM Emerging Markets ETF

The iShares MSCI Emerging Markets ETF (EEM​) has been on a steady progression higher for the past 11 months, ever since hitting a swing low of $33.94 in December of last year. Last month, EEM reached a high of $47.93 before it started to weaken. 

From the December low to last month's high, EEM had advanced $13.99, or 41.22%. During that advance, there was a steady pattern of higher monthly lows and higher monthly highs, which identified an uptrend. As of yesterday, that pattern has changed.

Read more at:

https://www.investopedia.com/trading/bearish-monthly-reversal-eem-emerging-markets-etf/