Wednesday, March 22, 2017

Nifty chart: a midweek technical update (Mar 22 ‘17)

FIIs were net buyers of equity worth Rs 20.8 Billion during the first three days of trading this week. DIIs were net sellers of equity worth Rs 21.1 Billion, as per provisional figures.

Nifty had touched a lifetime high of 9218 on Fri. Mar 17, but has been in a corrective mode this week. Today, the index opened with a downward 'gap' and closed below 9050, partly filling the 85 points upward 'gap' formed on Tue. Mar 14.


There were a few technical and fundamental signs of worry for bulls that were mentioned in last week's technical update on the daily bar chart pattern of Nifty.

Though a bull market is supposed to climb a 'wall of worries', the index rarely moves in one direction. Corrections do occur, and are necessary to improve the technical 'health' of charts.

The good news for bulls is that the index is trading above its three EMAs in a bull market, and the long-term bullish structure of Nifty's chart is intact.

Daily technical indicators are in bullish zones and showing downward momentum after correcting overbought conditions. Some more correction may be on the cards.

There is a good possibility that the index will completely fill the 85 points upward 'gap' formed on Tue. Mar 14, and test support from the 8950 level.

In case 8950 gets breached on the downside, expect stronger support from the zone between 8700-8800. 

Note that the 38.2% Fibonacci retracement level of the entire rally from the Dec '16 low (of 7894) to the Mar '17 top (of 9218) is 8712. 

Remember that after correcting down to fill an upward 'gap', an index typically resumes its up move. If you were waiting for a correction to enter, this is the one to do so.

Can Nifty fall below 8700? There is no rule which says it can't. So, it may be a good idea to wait for the index to find some support and bounce up before entering.

Nifty's TTM P/E remains high at 23.45. The breadth indicator NSE TRIN (not shown) is rising in neutral zone - hinting at some more correction.

Tuesday, March 21, 2017

WTI and Brent Crude Oil charts: break down sharply below consolidation patterns

WTI Crude Oil chart


The following comments were made in the previous post on the daily closing chart pattern of WTI Crude Oil: "Oil's price is likely to correct downwards from the 'wedge'. Stronger volumes on recent down days are indicating that bears are sensing an opportunity to attack."

Daily technical indicators, which were looking bearish and showing negative divergences, had also signalled a correction. 

Oil's price broke down below the 'rising wedge' pattern and plummeted below its 200 day EMA in the space of three trading sessions - wiping out all gains made in the previous three months. 

After a brief pullback above the 200 day EMA, oil's price has once again dropped into bear territory below its three EMAs.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones and are not showing any upward momentum. 

Bears have regained control of the chart. Expect some support at 47.

On longer term weekly chart (not shown), oil's price has dropped below its 20 week EMA and is seeking support from its 50 week EMA. It closed well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Brent Crude Oil chart


The daily closing chart pattern of Brent Crude Oil broke down sharply below the 'symmetrical triangle' pattern within which it was consolidating for the previous 10 weeks.

All gains made in the previous three months were erased in three trading sessions. Oil's price has bounced up after finding good support from its 200 day EMA.

The respite from a strong bear attack may be short-lived for bulls. Daily technical indicators are close to their respective oversold zones and showing downward momentum.

Some more correction - towards 49 - is likely.

On longer term weekly chart (not shown), oil's price has dropped below its 20 week EMA and is seeking support from its 50 week EMA. It closed well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Monday, March 20, 2017

S&P 500 and FTSE 100 charts (Mar 17 '17): bears getting ready to mount another attack?

S&P 500 index chart pattern


The following was the concluding comment in last week's post on the daily bar chart pattern of S&P 500: "Weekly technical indicators are still looking overbought, and hinting at some consolidation."

The index dropped down to test support from its rising 20 day EMA for the second time in two weeks, bounced up with good volume support but drifted sideways to close with a modest 6 points gain for the week.

The rate hike by the US Fed was expected, but the dovish stance on future rate hikes disappointed bulls. The US Dollar index slipped down.

After touching a lifetime high of 2401 on Mar 1, the index has been consolidating sideways within a small 'symmetrical triangle' pattern, while trading above its three rising EMAs in a bull market.

The logical breakout from the triangle should be upwards. However, triangles tend to be unreliable patterns. The sharp volume spike on Fri. Mar 17 raises concerns of another bear attack.

Daily technical indicators have corrected overbought conditions, but giving mixed signals. All three are in bullish zones, but MACD and RSI are showing downward momentum. Slow stochastic is showing upward momentum.

Wait for a breakout above 2400 or a correction below 2350 to decide whether to buy or sell.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are still looking overbought, and not showing any upward momentum. Expect some more consolidation or correction. 

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 moved convincingly above its previous (Mar 2) top on Thu Mar 16, and touched new lifetime intra-day (7447) and closing (7425) highs on Fri Mar 17. 

The index gained more than 1.1% for the week, and is trading well above its three rising EMAs in a bull market.

Daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index. A correction may be on the cards. (The index is trading about 15 points lower at the time of writing this post.)

The entire trading for the past two months has been within a large 'rising wedge' pattern from which the likely breakout is downwards. Maintain a stop-loss at 7300.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought and their upward momentum has stalled.

Sunday, March 19, 2017

Sensex, Nifty charts (Mar 17, 2017): FII buying propels both indices to new highs

The US Fed increased interest rate by 25 bps (0.25%) last week, but hinted at only one or two more hikes this year. The dovish stance caused a dip in the US Dollar index. FIIs made merry and piled into emerging market stocks.

In a truncated trading week, FII net buying in equities crossed Rs 81.2 Billion. DIIs were net sellers of equity worth Rs 21.9 Billion, as per provisional figures.

Both Sensex and Nifty opened trading with big upward 'gaps' on Tue Mar 14, and continued to trade above the 'gaps' for the rest of the week.

After BJP's big wins in UP and Uttarakhand state elections, the government has stepped up economic reform activities, and is considering relaxation of rules for FDI in multi-brand retail

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex formed a 280 points upward 'gap' on Tue. Mar 14 (Mon. Mar 13 was a holiday) on the back of heavy FII buying that took the index above the blue up trend line.

The index continued its upward march for the rest of the week, touching a new 52 week high of 29825 on Fri Mar 17, but fell 200 points short of its lifetime intra-day high of 30025 (touched on Mar 4 '15). 

The index ended the week at a lifetime closing high of 29649, gaining nearly 2.5% for the week. Time to celebrate for bulls?

Not yet. The index has closed at a lifetime high. That means it is likely to move even higher. However, technical indicators are hinting at a pause in the rally. All four are looking overbought, and showing negative divergences by touching lower tops. A correction or consolidation is likely.

The index is trading 2200 points above its 200 day EMA. The last time the index was trading so far above its 200 day EMA was on Sep 8 '16. Technical indicators had shown negative divergences then, and a sharp correction had followed.

FII buying may take the index even higher. But some times one needs to choose between capital appreciation and capital preservation. 

Bravehearts can maintain a trailing stop-loss and enjoy the ride. Conservative investors can book partial profits.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty formed a rare weekly upward 'gap' (of 82 points) and rose to touch a new lifetime intra-day high of 9218. The index closed at a lifetime high of 9160 - gaining more than 2.5% for the week. 

Nifty is trading more than 700 points above its rising 50 week EMA. The last time it did that - in the week ending on Sep 9 '16 - a sharp correction had followed.  

Weekly technical indicators are overbought and showing negative divergences by failing to touch new highs with the index. Nifty's TTM P/E is almost at 23.8 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dived back inside its overbought zone. 

An overbought market can remain overbought for long periods - specially with FIIs buying heavily. Sometimes you need to turn your paper profits into cash. This may be such a time. 

Bottomline? Bulls are in complete control of Sensex and Nifty charts. Bears have been brushed aside in an avalanche of liquidity flows. Both indices are looking quite overbought. That doesn't mean they can't move even higher. But as Falstaff had said: "The better part of valour is discretion..."

Friday, March 17, 2017

Stock Chart Pattern – SpiceJet (An Update)

Let's start with the good news first. Two years ago, Ajay Singh, the original promoter of SpiceJet, reportedly bought the debt-laden and about-to-be-shut-down company from Kalanithi Maran (of Sun TV) for Rs 2. 

The company has seen an upswing in its fortunes since then. Singh engineered a turnaround that moved the company back into the black after several years of losses. Capacity utilisation and on-time performance is one of the best in the domestic airline industry.

Lower oil (and ATF) prices helped in the turnaround. Govt's decision to revamp 50 under-utilised airports and announcement of 100% FDI in domestic airlines should further boost the growth of domestic airlines.


Now, the bad news. All is not well between Maran and Singh, with the former taking the latter to court for transgressions of their sales agreement. An adverse judgement could prove costly for the company.

More importantly - for existing and potential investors - the company's net worth is negative. It may take several years of profitable operations to clean up the balance sheet - which can be a chimera in the airline industry.



The daily bar chart pattern of SpiceJet shows that all the good news has already been discounted in the price. After touching multiple bottoms around 17 during Apr-Jun '15, the stock price shot up to touch a high of 95.30 on Jan 28 '16 - gaining a whopping 460% in 7 months.

All four technical indicators reached their overbought zones. Three of them - ROC, RSI, Slow stochastic - showed negative divergences by touching lower tops (marked by blue arrows). MACD formed a head-and-shoulders reversal pattern.

Bears used the opportunity to attack. The stock corrected more than 40% from its top, but found support at 55 near its rising 200 day EMA. That was a year ago.

Since then, the stock has been consolidating sideways in a 30 points range within a 'rectangle' pattern. The price has moved up to the top edge of the 'rectangle' for the first time since May '16. However, technical indicators are looking overbought. ROC and RSI are showing negative divergences by touching lower tops.

A 'rectangle' is usually a continuation pattern. Since the stock's price entered the 'rectangle' after a correction, the breakout should be downwards. However, a 'rectangle' is an unstable pattern. A breakout can occur in either direction. 

Since the stock is trading above its three rising EMAs in bull territory, the breakout can occur upwards as well. In fact, an attempted upward breakout today was thwarted by bears.

There is a saying about the airline industry: If you want to be a millionaire in the sector, start with a billion. Mallya and Maran have already proved the veracity of that adage.

If you are planning to enter the counter - don't. If you are an existing holder - book out. There are far better sectors to invest in. Which ones? Check out the link below:

Which sectors should you invest in?

Wednesday, March 15, 2017

Nifty chart: a midweek technical update (Mar 15 ‘17)

FIIs were net buyers of equity worth Rs 52.3 Billion during the first two days of a holiday-shortened trading week. DIIs were net sellers of equity worth Rs 13.9 Billion, as per provisional figures.

Excellent performance of the ruling NDA in the state elections ensured that Nifty opened with a huge upward 'gap' on Mar 14 and touched a new lifetime high of 9123 - just managing to cross above its Mar '15 top of 9119.

However, the index failed to close above the 9100 level and formed a 'doji' candlestick pattern that indicates indecision among bulls and bears. Today, the index touched a lower top and closed slightly lower - showing a lack of follow-up buying.  


The daily bar chart pattern of Nifty is trading well above its three rising EMAs in a bull market. The 85 points upward 'gap' formed on Mar 14 is looking like an 'exhaustion gap' that can trigger a correction.

There are several signs of worry for bulls - both technical and fundamental.

All three daily technical indicators are looking overbought, and showing negative divergences by touching lower tops when the index touched a new lifetime high.

Nifty's TTM P/E has crossed above the 23.5 mark - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is in neutral zone. 

Both WPI and CPI inflation are rising. WPI rose to 6.55% in Feb '17 - its highest level in three years - from 5.25% in Jan '17. CPI rose to 3.65% in Feb '17 from 3.17% in Jan '17.

Pent-up demand due to demonetisation can increase upward pressure on prices. RBI may be forced to maintain status quo on interest rates.

US Fed's likely interest rate hike announcement should boost the US Dollar index. That may induce FIIs to book profits.

Bull markets are supposed to climb a wall of worries. But Nifty has already climbed 1220+ points (15%+) from its Dec '16 low of 7894. It may be better to err on the side of caution.

Stay on the sidelines till there is clear evidence of follow-up buying that can take Nifty to a convincing close above 9119. (Note that Sensex is still 500 points short of testing its lifetime Mar '15 high.)

Tuesday, March 14, 2017

Gold and Silver charts: bulls retreat after facing strong bear attacks

Gold chart pattern


In the previous post on the daily bar chart pattern of Gold, technical indicators were looking overbought and showing negative divergences. The combination usually triggers a correction or consolidation.

A sharp correction ensued. Gold's price dropped 70 points (to 1195) in the space of 9 trading sessions - wiping out all the gains made during Feb '17. Is the bull rally over?

It certainly appears so. All three daily technical indicators have fallen inside bearish zones. Slow stochastic is trying to recover from its oversold zone, and may initiate an upward bounce.

Note that the rally from the Dec '16 low (of 1125) to the Feb '17 top (of 1265) covered 140 points. By falling 70 points, gold's price shows an exact 50% retracement of its recent gains. 

That happens to be a Fibonacci retracement level that often demarcates a battle line between bulls and bears. In other words, a fall below 1195 will hand the advantage back to bears.

Gold's price is trading below its three EMAs in bear territory. If bulls manage to prop gold's price above 1200, they may be able to regroup and mount another rally.

An impending interest rate hike by the US Fed, which is expected to boost the US Dollar index, can put a spanner in the works.

On longer term weekly chart (not shown), gold’s price formed a 'reversal bar' (higher high, lower close) and has closed below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Silver chart pattern


The daily bar chart pattern of Silver attempted to cross above the 18.50 level on four consecutive trading sessions but failed.  All four daily technical indicators were inside their overbought zones.

That was just the opportunity that bears needed. Silver's price dropped sharply below 17 before recovering a bit. 

Silver's price is trading below its three EMAs in bear territory. The 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market.

Daily technical indicators are in bearish zones. Slow stochastic is well inside its oversold zone, and may trigger an upward bounce. Expect bears to use the opportunity to sell again.

On longer term weekly chart (not shown), silver’s price faced resistance from its 200 week EMA, and dropped to close below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish and showing downward momentum.