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Friday, September 22, 2017

Active Traders Focus Attention on Emerging Markets

"North American investors have started adjusting their investment allocation in favor of emerging markets in recent months in hopes of profiting from one of the strongest up trends anywhere in the public markets. 

In this article, we take a look at several charts and try to filter down exactly how international investors are looking to capture the rise in developing economies."

Read more at:


http://www.investopedia.com/news/active-traders-focus-attention-emerging-markets/

Wednesday, September 20, 2017

Nifty chart: a midweek technical update (Sep 20 ‘17)

FIIs were net sellers of equity worth Rs 30 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 16.4 Billion, as per provisional figures. Nifty touched a new closing high of 10153 on Mon. Sep 18 and a new intra-day high of 10179 on Tue. Sep 19.

After the fiasco of demonetisation, GST implementation is turning out to be another thorn in the flesh for the NDA government. The balloon of July's tax collection of Rs 950 Billion was punctured by input tax credit claims of Rs 650 Billion.

Tata Steel has announced a 50-50 joint venture in Europe with Thyssenkrupp. The JV is expected to absorb a large portion of Tata Steel Europe's debt (which was used to acquire Corus 9 years ago).


The daily bar chart pattern of Nifty touched a new high of 10179 on Sep 19, but formed a 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Despite strong selling by FIIs, large inflows into domestic mutual funds and the consequent buying by DIIs propelled the index to a new high. The index is trading well above its three rising EMAs in a bull market.

Daily technical indicators are in bullish zones. But caution is advised because MACD and RSI are showing negative divergences by touching lower tops while the index rose higher. Some correction or consolidation may follow.

The entire 7 weeks' trading from Aug '17 onward has formed a large 'rising wedge' pattern, which has bearish implications. Bulls are struggling to move the index above its Aug 2 top of 10138 in a convincing manner.

Nifty's TTM P/E is at 26.39 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is hovering just above its overbought zone, and can limit index upside.

Small investors may be feeling confused about what to do. Confusion comes from lack of a plan for long-term investing. As has been repeated ad nauseam in this blog, your asset allocation plan should decide what needs to be done regardless of the state of the market.

A bull market is supposed to climb a wall of worries. If you are tired of waiting for a correction and can't stop the urge to jump in to the market, select your stocks very carefully, and use a strict 'stop-loss' every time you buy a stock.

Tuesday, September 19, 2017

WTI and Brent Crude Oil charts: bulls finally breaking bear strangleholds

WTI Crude Oil chart


Bulls are on the verge of breaking the stranglehold of bears on the daily bar chart pattern of WTI Crude Oil

By moving above the Aug 1 top of 50.43 and touching an intra-day high of 50.85 on Sep 18, the bearish pattern of 'lower tops, lower bottoms' that dominated the chart for more than 6 months has been negated.

Bulls still have some work left before they can send bears packing. Oil's price failed to close above the Aug 1 top, and formed a 'long-legged doji' candlestick pattern - leaving the door open for another bear attack.

Sliding volumes during the month raises concerns that the rally may not sustain. The 'golden cross' of the 50 day EMA above the 200 day EMA, which will technically confirm a return to a bull market, is awaited.

Daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with oil's price. Slow stochastic appears to be forming a 'double top' reversal pattern inside its overbought zone, which can trigger a correction.

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are looking bullish. Slow stochastic is looking overbought.

Brent Crude Oil chart


The following comments were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "A 'rectangle' is usually a continuation pattern. Since oil's price entered the pattern from below during a rally, the logical breakout should be upwards (i.e. above 53)."

Oil's price broke out above the 'rectangle' on Sep 5, but the breakout wasn't accompanied by a volume surge that would have technically validated the breakout. 

It was no surprise that oil's price formed a 'reversal day' bar (higher high, lower close) on Sep 8 and pulled back to the top of the 'rectangle' on Sep 11. Those who missed buying on the breakout, got an opportunity to do so on the pullback.

Oil's price rose above 55.50, but formed another 'reversal day' bar on Sep 18, which may lead to some correction or consolidation. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.

Daily technical indicators are looking bullish. Slow stochastic may be forming a 'double top' reversal pattern inside its overbought zone. That may trigger some correction or consolidation. 

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are looking bullish. Slow stochastic is looking quite overbought and can limit further upside.

Monday, September 18, 2017

S&P 500 and FTSE 100 charts (Sep 15 '17): bulls rule one, bears rule the other

S&P 500 index chart pattern


The following remarks were made in last week's post on the daily bar chart pattern of S&P 500

"The index may be in the process of forming a 'diamond' pattern. A 'diamond' can be a reversal pattern or a continuation pattern. So, await the breakout before deciding to buy or sell. An upward breakout above 2480 will be bullish. A downward breakout below 2440 will be bearish."

On Mon. Sep 11, the index opened trading with an upward 'gap' and broke out above the 'diamond' pattern and the 2480 level. It closed just below 2490. During the rest of the week, the index consolidated sideways with an upward bias, and closed at a lifetime high of 2500 - with a gain of 1.6% on a weekly closing basis.

Note the large spike in volume on Fri. Sep 15. That may be the sign of a 'buying climax' that can lead to a pullback towards the 'diamond' pattern. Such a pullback will provide a buying opportunity to those who missed buying on the upward break out.

Daily technical indicators are in bullish zones. MACD is rising above its signal line in overbought zone. RSI is moving sideways below its overbought zone. Slow stochastic is well inside its overbought zone. MACD and RSI are showing negative divergences by failing to touch new highs with the index.

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 in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The following remark in last week's post on the daily bar chart pattern of FTSE 100 provided adequate warning to investors: "A likely downward breakout below 7300 can lead to a test of support from, or even a breach of, the 200 day EMA."

The index made a couple of futile attempts to move above the (purple) down trend line on Mon. Sep 11 & Tue. Sep 12. Bears took control right away.

On Thu. Sep 14, the index dropped and closed just below the support level of 7300. On Fri. Sep 15, the index fell sharply below the 200 day EMA and the 7200 level intra-day, before managing to close above 7200 - with a loss of 2.2% on a weekly closing basis.

(At the time of writing this post, the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity.)

Daily technical indicators are looking bearish and showing downward momentum. Some more correction - perhaps a test of the Apr '17 low of 7100 - is possible.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA and is seeking support from its 50 week EMA, but closed well above its 200 week EMA in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI has fallen below its 50% level. Slow stochastic has re-entered its oversold zone.

Sunday, September 17, 2017

Sensex, Nifty charts (Sep 15, 2017): bulls trying to regain control

FIIs were net sellers of equity worth Rs 33.6 Billion for the week. DIIs were net buyers of equity worth Rs 38.3 Billion, as per provisional figures. Sensex gained 1.8% and Nifty gained 1.5% on weekly closing basis.

WPI inflation rose to a 4 month high of 3.24% in Aug '17, against 1.88% in Jul '17 and 1.09% in Aug '16 as prices of vegetables soared.

India's exports grew 10.29% while imports grew 21% in Aug '17. The trade deficit widened to $11.64 Billion against $7.7 Billion in Aug '16 - mainly due to higher oil and gold imports. 

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex gained nearly 600 points for the week as bulls tried to regain control of the chart. The index is trading above its three rising EMAs in a bull market.

The 20 day EMA and the MACD signal line are forming bullish 'saucer' patterns, but bears have not been routed yet. 

Sensex is more than 400 points below its lifetime high of 32686 (touched on Aug 2). After breaking out above a bearish 'rising wedge' pattern (refer last week's post), the index is consolidating within a bearish 'flag' pattern.

Daily technical indicators are in bullish zones, but sending conflicting signals. MACD is rising above its signal line. ROC has dropped to seek support from its 10 day MA. RSI is retreating after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways inside overbought zone.

Some more consolidation within the 'flag' and a breakout below it are possibilities. Note that FIIs were net buyers of equity on Fri. Sep 15. If they continue buying, the scales will tip towards bulls.

Stay invested. Remain cautiously optimistic.

NSE Nifty index chart pattern




The weekly bar chart pattern of Nifty moved above the 'rising wedge' pattern formed during the previous 4 weeks, but faced resistance from the lifetime high level of 10138 (touched in the week ending on Aug 4 '17).

The past 7 weeks' trading appears to have formed an 'ascending triangle' pattern from which the likely break out is upwards.

Note that the index is in the process of forming either a continuation or a reversal pattern. Just as a bearish 'rising wedge' turned into a bullish 'ascending triangle', the pattern may further evolve to form a 'rectangle' or a 'broadening top' pattern.

The index is trading above its two rising weekly EMAs in a bull market. Bulls will regain control only after a convincing move above the lifetime high of 10138. That hasn't occurred yet. 

Weekly technical indicators are looking overbought. MACD is moving sideways below its signal line inside overbought zone. ROC  has merged with its 10 week MA and moving sideways below its overbought zone. RSI is rising towards its overbought zone. Slow stochastic is about to enter its overbought zone.

Nifty's TTM P/E is now at 26.24 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating near the edge of its overbought zone and can limit index upside. 

Bottomline? Sensex and Nifty charts have been consolidating sideways with upward biases for the past 5 weeks. DII buying seems to have negated the 
earlier bearishness. FIIs are still selling. Inflation and the trade deficit are rising. The low Jul '17 IIP number shows that manufacturing growth remains muted. So, caution is advised.

Friday, September 15, 2017

7 Habits that can lead to Future Wealth

Unless you expect to win the lottery, or inherit the estate of a wealthy aunt, or write a killer app that Google or Amazon pays several million dollars to acquire - it is unlikely that you will get wealthy overnight.

Forget about the rags-to-riches stories. Most of them are really that - stories. People who are wealthy have put in a lot of time and effort to achieve their successful financial status.

If you wish to own a tree that will bear delicious fruits for many years, you won't be able to just buy it. You need to buy a sapling from a nursery, plant it, water it, fertilise it, protect it from the elements for several years before it can bear fruits.

To build wealth for the future, you need to make long-term plans and have a disciplined approach towards saving and investing. It is possible to do it on your own. But it is better if you seek advice from an experienced financial planner.

Sarah Chandler explains 7 habits that can lead to future wealth in an article in investopedia.com. Read it here.

Thursday, September 14, 2017

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

Net selling in equities by FIIs touched Rs 24.5 Billion during the first three days of trading this week. DIIs more than matched them with their net buying - worth Rs 29.2 Billion, as per provisional figures.

A flood of domestic liquidity propelled Nifty to breakout above the bearish 'rising wedge' pattern that had formed after a correction from a 'diamond' pattern.

India's macroeconomic situation remains a concern. CPI inflation rose to 3.36% in Aug '17 against 2.36% in Jul '17. The IIP improved to 1.2% in Jul '17 against -0.2% in Jun '17, but was much lower than 4.5% in Jul '16.

The combination of rising inflation and muted industrial growth may force RBI to maintain status quo on interest rates.


The daily bar chart pattern of Nifty broke out above the 'rising wedge' pattern on Tue. Sep 12, and tested its lifetime Aug 2 high of 10138 on Wed. Sep 13.

Time to send the bears packing? Not yet. The index retreated after touching a slightly lower top of 10132 - forming a 'reversal day' bar (higher high, lower close) that often marks an intermediate top. 

If the index fails to rally past its Aug 2 high of 10138 and starts correcting instead, a 'double top' reversal pattern may form - with a downward target of 9240.

The 'double top' will be technically confirmed only if Nifty falls below its Aug 11 low of 9686. With DIIs buying heavily, the probability of that happening seems low.

However, the break out below the 'diamond' followed by the formation of a bearish 'rising wedge' pattern should be treated with caution. If the index starts to correct and drops back inside the 'wedge' then bullish bets should be kept on hold.

Daily technical indicators are in bullish zones. MACD is showing upward momentum but RSI is not. Slow stochastic is inside its overbought zone and can trigger a pullback towards the 'rising wedge'.

Nifty's TTM P/E is at 26.23 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone and may limit index upside.

Nifty is trading above its three rising EMAs in a bull market. However, the index has been hesitating after touching a lifetime high 6 weeks back. Small investors should also hesitate before deciding to jump into the market feet first. When everyone appears to be greedy, one should be fearful.