Sunday, April 22, 2018

Sensex, Nifty charts (Apr 20, 2018): counter trend rallies pause at resistance zones

FIIs were net sellers of equity on all five trading days. Their total net selling during the week was worth Rs 28.2 Billion. DIIs were net buyers of equity on four out of the five trading days. Their net buying was worth Rs 21.2 Billion.

Sensex and Nifty are in the midst of counter-trend rallies that have paused after retracing 50% of their entire falls from their Jan '18 tops to their Mar '18 lows. Sensex gained 0.65% and Nifty gained 0.8% on a weekly closing basis.

As per a report by the PHD Chamber of Commerce, after-effects of demonetisation and delays in GST refunds curtailed India's exports in FY 2017-18 amid a revival in global demand. A moderate 10% growth in exports led to a 45% jump in India's trade deficit.

In the Jan-Mar '18 period, there were 205 PE (Private Equity) deals worth US$ 4.0 Billion. In the same period a year ago, 196 deals involved US$ 2.27 Billion, according to a report by tax and advisory firm Grant Thornton. 

BSE Sensex index chart pattern


The counter-trend rally on the daily bar chart pattern of Sensex appears to have hit a road block at the 34450 level - which is the upper boundary of the 'resistance zone' (marked by dotted rectangle).

Bears were expected to defend the 'resistance zone', and they have done it thus far. The (blue) up trend line from the Mar '18 low has admirably supported the counter-trend rally.

The index is at the important technical level of 34450, which happens to be the 50% Fibonacci retracement level of the entire fall from the Jan 29 top to the Mar 23 low. Technical traders often treat the 50% retracement level as a trend-deciding level.

The 20 day EMA has crossed above the 50 day EMA, and all three EMAs are rising - with the index trading above them in a bull market. However, daily technical indicators are looking overbought and hinting at a near-term correction.

MACD is rising above its signal line in bullish zone, but its upward momentum is decelerating. ROC has formed a 'triple-top' reversal pattern inside its overbought zone and dropped below its 10 day MA. RSI may be forming a 'double-top' reversal pattern inside its overbought zone. Slow stochastic has started to correct inside its overbought zone.

Bears are getting ready to reverse the counter-trend rally. In case the rally continues, expect strong resistance from the 132 points 'gap' formed on Feb 5. Partial profit booking may be a good idea. 

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty crossed above the 'resistance zone' between 10490 and 10550, and just managed to close above the zone in bull territory. But bulls need not get overjoyed.

Note that trading volumes have been falling for the past three weeks. The counter-trend rally from the Mar '18 low is obviously losing steam.

Weekly technical indicators are looking neutral to bullish. MACD is trying to move up in bullish zone, but remains below its falling signal line. ROC has crossed above its 10 week MA. RSI is facing resistance from its 50% level. Slow stochastic is rising towards its 50% level.

Any further continuation of the counter-trend rally is expected to receive strong resistance from the 33 points downward 'gap' formed on Feb 5. Bears will remain in charge as long as the index trades below the 'gap'.

Nifty's TTM P/E has moved up to 26.22 - which is much above its long-term average. The breadth indicator NSE TRIN (not shown) has bounced up from the edge of its oversold zone, and can trigger a correction. 

Bottomline? Sensex and Nifty charts are in the midst of counter-trend rallies that have paused at resistance zones - as if waiting for improvement in Q4 (Mar '18) corporate results before deciding on their next directional moves. High oil prices, a weakening Rupee and a widening trade deficit doesn't augur well for India's economic growth. Some correction and/or consolidation is likely. 

Friday, April 20, 2018

What India’s Top Three Mutual Funds Bought And Sold In March 2018

Inflows into equity mutual funds hit a 13 month low in March as net investments into these funds declined 59 percent over the previous month to Rs 66.6 Billion, according to Association of Mutual Funds in India data. 
That’s despite a record inflow of Rs 37 Billion into equity-linked savings schemes in the last month of the financial year to help save on income tax.
Here’s what India’s top three fund houses bought and sold in March:

Wednesday, April 18, 2018

Nifty chart: a midweek technical update (Apr 18, 2018)

FIIs were net sellers of equity on all three days of trading this week. Their total net selling was worth Rs 21.7 Billion. DIIs were net buyers of equity on Tue. & Wed. (Apr 17 & 18) but net sellers on Mon. Apr 16. Their total net buying was worth Rs 15.6 Billion, as per provisional figures.

For the 13th trading day in a row, Nifty touched a higher intra-day high (of 10594 today) as it continued its counter-trend rally from its Mar 23 low of 9952, but failed to close above the Fibonacci resistance zone (between 10400 & 10550 - refer last week's post).

The International Monetary Fund (IMF) has projected India's GDP growth rate at 7.4% in FY 18-19 and 7.8% in FY 19-20 against 6.7% in FY 17-18 - making it the world's fastest growing major economy.



After 9 consecutive days of gains, the daily bar chart pattern of Nifty formed a 'reversal day' bar (higher high, lower close) today, and closed lower within the Fibonacci resistance zone. A 'reversal day' bar often forms at an intermediate top.

All three EMAs are rising, and Nifty closed above them in bull territory. However, bulls still have a lot of work left. The 33 points downward 'gap' looming overhead is expected to provide strong resistance - as and when Nifty makes an attempt to fill it.

Daily technical indicators are in bullish zones, but only MACD is showing upward momentum as it rises above its signal line. RSI and Slow stochastic are poised to move down. The index can correct or consolidate within the resistance zone.

The (purple) up trend line from the Mar 23 low is a bit steep, so its downward breach may not be too bearish. But a fall below 10400 will signal the next leg of the down move from Nifty's Jan 29 top. 

Nifty's TTM P/E has moved up to 26.13 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone, and can limit index upside.

Small investors shouldn't get too enamoured by the counter-trend rally. Such rallies are often sharp, but can flatter to deceive. On the macroeconomic front, rising oil prices and a falling Rupee is stirring up a deadly cocktail that can stoke inflation and force RBI to raise interest rates. 

Tuesday, April 17, 2018

Gold and Silver charts: sideways consolidations continue

Gold chart pattern


The daily bar chart pattern of Gold continued its sideways consolidation between the 'Support zone' (1300-1310) and the 'Resistance zone' (1360-1370). The consolidation has entered its 4th month.

The entire consolidation has occurred above the rising 200 day EMA in a bull market. So, the logical break out from the consolidation should be upwards. But markets don't always follow or understand logic - at least in the near term.

Note that gold's price made a futile attempt to cross above the 'resistance zone' on Wed. Apr 11, and dropped to close at 1360 (lower edge of the 'resistance zone'). The accompanying volume surge may be a sign of 'buying climax'.

Gold's price corrected below its rising 20 day EMA intra-day on Fri. Apr 13, but bounced up to close above its three rising EMAs in bull territory.

Daily technical indicators are giving conflicting signals - which is often the case during periods of consolidation. MACD is showing slight upward momentum in bullish zone. RSI is moving sideways above its 50% level. Slow stochastic has fallen to its 50% level. 

RSI and Slow stochastic touched lower tops on Apr 11 while gold's price rose higher. The negative divergences can trigger a corrective move towards the 'support zone'.

On longer term weekly chart (not shown), gold’s price closed above its three rising weekly EMAs in long-term bull territory.  Weekly technical indicators are in bullish zones, but not showing any upward momentum. Some more consolidation is likely.

Silver chart pattern


The following remarks were made in the previous post on the daily bar chart pattern of Silver: "A rally above the 200 day EMA is a possibility. Bears are likely to use the opportunity to sell again."

Silver's price rallied above its sliding 200 day EMA intra-day on Wed. Apr 11, only to face strong resistance from the 16.90 level (lower edge of the 'resistance zone') and closed just below the 200 day EMA.

On Apr 12, silver's price faced selling pressure and closed below its three EMAs in bear territory. It has since bounced up above its 20 day and 50 day EMAs.

The sideways consolidation between the 'Support zone' (16.10-16.20) and the 'Resistance zone' (16.90-17.00) has entered its 3rd month. The longer the consolidation, the stronger can be the eventual break out.

The entire consolidation has occurred below the sliding 200 day EMA in a bear market. So, the logical break out from the consolidation should be downwards. However, it may be prudent to wait for the break out before taking any buy/sell decision.

Daily technical indicators are in bullish zones, but not showing any upward momentum and hinting at some more consolidation.

On longer term weekly chart (not shown), silver’s price closed at its 20 week EMA, but below its sliding 50 week and 200 week EMAs in a long-term bear marketWeekly MACD and Slow stochastic are in bearish zones. RSI is in neutral zone.

Monday, April 16, 2018

S&P 500 and FTSE 100 charts (Apr 13, 2018): bears refusing to release their strangleholds

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 rallied above its 20 day EMA only to face strong resistance from its falling 50 day EMA on Fri. Apr 13. The index formed a 'reversal day' bar (higher high, lower close) and dropped below its 20 day EMA, but recovered to close just above it.

The index gained 2% on a weekly closing basis. Note that the counter-trend rally from the Apr 2 low of 2554 has been accompanied by sliding volumes - which doesn't augur well for the sustainability of the rally.

Daily technical indicators are giving conflicting signals. MACD and Slow stochastic are showing upward momentum. MACD has crossed above its signal line, but remains well within its bearish zone. Slow stochastic is about to enter its overbought zone. RSI is facing resistance from its 50% level.

The index has formed three unfilled downward 'gaps' - marked 'GAP 1', 'GAP 2' and 'GAP 3'. 'GAP 1' - formed on Jan 30 - is a 'breakaway gap' that triggered the correction. The subsequent sharp increase in volumes is an indication that 'GAP 1' may not get filled for a long while.

'GAP 2' and 'GAP 3' - formed on Mar 19 & 22 - are 'runaway gaps' (also called 'measuring gaps' because they tend to form at the mid-point of a move). Since the two gaps are in close proximity, the mid-point of the down move can be selected as the mid-point between the two gaps - which is at about 2720.

That gives a downward index target of about 2590, which has already been met on Apr 2. So, the current leg of the correction is over, but bulls have their work cut out if they want to get back to their glory days. The missile attack on Syria is not going to help the bullish cause.

The first and most critical task for bulls will be to cover/fill 'GAP 3' and 'GAP 2'. Even if both 'gaps' are filled the index can be expected to resume its correction.

On longer term weekly chart (not shown), the index faced resistance from its 20 week EMA for the third straight week, but managed to close above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD and Slow stochastic are looking bearish. RSI is in neutral zone.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 rallied past its falling 50 day EMA and the resistance level of 7200 during the week. The index closed above the 7250 level with a weekly gain of 1.1%.

Daily technical indicators are bullish. MACD is rising above its signal line in bullish zone. RSI has crossed above its 50% level. Slow stochastic is well inside its overbought zone, and can trigger some correction/consolidation.

If the counter-trend rally continues, expect overhead resistance from the 7300 level and the sliding 200 day EMA. (At the time of writing this post, the index is struggling to stay above 7250.)

The combined missile attack on Syria by USA, UK and France last Saturday (Apr 14) may have provided another excuse to bears to 'sell on rise'.

On longer term weekly chart (not shown), the index closed above its 200 week EMA in a long-term bull market, but is facing resistance from its 20 week and 50 week EMAs. Weekly technical indicators are correcting oversold conditions, but remain in bearish zones. 

Sunday, April 15, 2018

Sensex, Nifty charts (Apr 13, 2018): counter trend rallies reach resistance zones

FIIs were net sellers of equity on three out of the five trading days. Their total net selling during the week was worth Rs 16.5 Billion. DIIs were net buyers of equity on four out of the five trading days. Their net buying was worth Rs 8.2 Billion.

Sensex and Nifty are in the midst of counter-trend rallies that are retracing the entire falls from their Jan '18 tops to their Mar '18 lows. Sensex gained 1.7% and Nifty gained 1.4% on a weekly closing basis.

India's trade deficit widened to US $156.8 Billion in FY 17-18 against $108.5 Billion in FY 16-17. Exports grew 9.8% to $302.8 Billion, but imports grew 19.6% to $459.7 Billion.  

BSE Sensex index chart pattern



The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "Sensex is trying to retrace the 3960 points fall from the Jan 29 top of 36444 to the Mar 23 low of 32484. Fibonacci retracement levels of 38.2% and 50% means near-term upward index targets of about 34000 to 34450."

The dotted box on the chart represents the zone between 34000 and 34450. Sensex crossed above the resistance level of 33800, and closed in the middle of the resistance zone. 

Bears can be expected to defend the resistance zone - and may get extra impetus from Saturday's (Apr 14) missile attack on Syria by USA, UK and France that can send oil prices higher.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line and has re-entered bullish territory after two months. ROC and Slow stochastic are inside their respective overbought zones. RSI appears ready to enter its overbought zone.

Sensex has been in an up trend since touching its Mar 23 low, and closed above its three EMAs in bull territory. Can it rally further? The possibility can't be ruled out. The 132 points 'gap' formed on Feb 5 is likely to provide strong overhead resistance.

Incidentally, the trend-deciding 61.8% Fibonacci retracement level of the 3960 points fall from the Jan 29 top to the Mar 23 low is at 34931 - which is bang in the middle of the 'gap'. 

As per 'gap theory', an index (or stock) should resume its previous trend after a 'gap' gets partly or completely filled. Sensex was already falling when the 'gap' was formed. It should resume its down trend if and when the 'gap' gets filled.

What should small investors do? Check Q4 (Mar '18) results and take stock specific buy/sell decisions instead of worrying about index movements.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty crossed above its 20 week EMA into bull territory, but is facing resistance from the zone between 10490 & 10550. 

Note that the 10550 level - which is the 50% Fibonacci retracement level of the 1220 points fall from the Jan '18 top to the Mar '18 low - may provide strong resistance.

The 61.8% Fibonacci retracement level, which technical experts often use as a trend-deciding level, is at 10706 - right in the middle of the 33 points 'gap' formed on Feb 5. Bears can be expected to become active if the index rallies further towards the 'gap'.

Weekly technical indicators are turning bullish, and hinting at some more upside. MACD has stopped falling, and is moving sideways below its falling signal line in positive zone. ROC is about to cross above its falling 10 week MA in bearish zone. RSI is in neutral zone. Slow stochastic has emerged from its oversold zone. 

Nifty's TTM P/E has moved up to 26.01 - which is much above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen sharply from its oversold zone, and can cap index upside. 

Bottomline? Sensex and Nifty charts are in the midst of counter-trend rallies that have reached resistance zones. Some correction and/or consolidation is likely. Await Q4 (Mar '18) results before deciding to buy/sell.

Saturday, April 14, 2018

Singapore's Nifty Giraffe Beats India Stock Data Ban by a Neck

Singapore Exchange Ltd. has announced a new product that an excited hedge-fund manager described to me as the "most brilliant use of finance."
That's an exaggeration, of course, though with a large grain of truth.
SGX will launch three derivative products in June: SGX India futures; SGX India options; and SGX India bank futures. For 29 out of 30 days, these contracts won't be anchored by any underlying security or index; they will be whatever their buyers and sellers want them to be.
Read more here.