Wednesday, February 21, 2018

Nifty chart: a midweek technical update (Feb 21, 2018)

FIIs were net sellers of equity worth Rs 29.6 Billion during the first three trading days this week. DIIs were net buyers of equity worth Rs 34 Billion, as per provisional figures.

The 33 points downward 'gap' formed on Feb 5 is looming like a dark cloud over bullish hopes of a quick index recovery - threatening more rain (i.e. selling).

India's trade deficit widened to a 56 months high of US $16.3 Billion in Jan '18 compared to $14.9 Billion in Dec '17 and $9.91 Billion in Jan '17. The deficit increased to $131.14 Billion during Apr '17-Jan '18 period against $114.9 Billion during Apr '16-Jan '17.


The daily bar chart pattern of Nifty has been consolidating sideways after falling below its 50 day EMA to an intra-day low of 10276 on Feb 6. The sliding 50 day EMA has provided strong overhead resistance since then.

The Feb 6 panic low was tested on Feb 19 without getting breached. The index bounced up a bit today on short-covering. The index continues to trade above its rising 200 day EMA, so all is not lost yet for bulls.

However, the 20 day EMA is about to cross below the 50 day EMA after staying above it for almost 13 months. A test of support from the 200 day EMA may occur sooner than later.

Can the index fall below the 200 day EMA? The possibility can't be ruled out, as FIIs are selling large-cap stocks. Will that indicate the beginning of a bear market? Not quite.

A 20% correction from the top - i.e. to 8940 - will be treated technically as start of a bear market. That is a long way down from the current level. 9700 is a strong support level. Buying should emerge in the zone between 10000 & 9700.

Daily technical indicators are in bearish zones. MACD is showing negative divergence by falling below its Dec '17 low. RSI is moving sideways. Slow stochastic has entered its oversold zone and can trigger a technical bounce.

Nifty's TTM P/E has slipped to 25.18 - still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone. The index may pullback towards its 50 day EMA. 

The long-term bullish structure of the chart remains intact. In the near term, 'sell on rise' may be a better option to get rid of non-performers from one's portfolio.

Tuesday, February 20, 2018

Gold and Silver charts: facing resistances after pullback rallies

Gold chart pattern


The daily bar chart pattern of Gold corrected below its 20 day and 50 day EMAs, but received good support from the 'support/resistance' zone between 1300 & 1310.

The overbought Slow stochastic indicator triggered a sharp pullback rally that touched a slightly lower top of 1364.40 on Fri. Feb 16. Formation of a long-legged doji candlestick pattern indicates hesitation among bulls and bears.

Gold's price appears to have formed a 'double top' reversal pattern inside the resistance zone between 1360 & 1380. The first technical confirmation of a 'double top' - lower volumes during formation of the second top - has been received.

The second technical confirmation - a fall below the 'valley' low of 1309 touched on Feb 8 - is awaited. (At the time of writing this post, gold's price has slipped down to 1340.)

Daily technical indicators are in bullish zones. MACD has crossed above its signal line. Slow stochastic has risen well inside its overbought zone. RSI is showing negative divergence by sliding down as gold's price rose higher on Feb 16.

Another fall towards the 'support/resistance' zone between 1300 & 1310 is possible. Gold's price is trading above its three EMAs in a bull market. Bulls are likely to 'buy the dip' again.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory, but may have formed a 'double top' reversal pattern.  Weekly technical indicators are in bullish zones, but not showing much upward momentum. Slow stochastic has dropped from its overbought zone. 

Silver chart pattern


The daily bar chart pattern of Silver corrected to an intra-day low of 16.13 on Feb 9. Overbought Slow stochastic and a small 'double bottom' reversal pattern on RSI led to a pullback rally.

The rally failed to overcome strong resistance from the 200 day EMA. Silver's price closed below its three EMAs in bear territory.

Daily technical indicators are looking neutral to bearish. MACD has moved up towards its signal line in bearish zone but has not been able to cross above it. RSI and Slow stochastic are facing resistances from their respective 50% levels.

Expect bears to 'sell on rise'. (At the time of writing this post, silver's price has slipped down to 16.44.)

On longer term weekly chart (not shown), silver’s price closed below its three weekly EMAs in a long-term bear marketWeekly technical indicators are in bearish zones. 

Monday, February 19, 2018

S&P 500 and FTSE 100 charts (Feb 16, 2018): bulls fighting back

S&P 500 index chart pattern


The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "...the index has fallen like a stone from its Jan 26 top. Such a steep fall can't be sustained. Expect some pullback and consolidation on short-covering and bottom fishing. That will provide an exit opportunity from a short-term perspective."

The expected pullback turned into a sharp rally as bulls fought back and propelled the index above its three EMAs into bull territory. Is the correction over?

The index has retraced 65% of its 340 points fall from the Jan 26 top (2873) to the Feb 9 low (2533). That is more than the 61.8% Fibonacci retracement level that is considered by technical traders as a trend reversal level.

However, on a closing basis the (292 points) correction has been retraced 52% - a bit more than the 50% Fibonacci retracement level. Also, by closing near the opening and intra-day low level on Fri. Feb 16, the index formed a 'shooting star' candlestick that has bearish implications.

Daily technical indicators have corrected oversold conditions, but MACD is still in bearish zone and RSI is in neutral zone. Slow stochastic has entered bullish zone above its 50% level.

Note that last week's steep rally was on sliding volumes. The rally may be losing steam. That will be just the incentive bears need to go on the offensive once again.

On longer term weekly chart (not shown), the index bounced up after receiving good support from its 50 week EMA, and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators have corrected extremely overbought conditions. MACD has crossed below its signal line in bullish zone. RSI has bounced up after receiving support from its 50% level. Slow stochastic is seeking support from its 50% level.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 had formed a small 'double bottom' reversal pattern by touching an intra-day low of 7073 on Fri. Feb 9. Technical indicators were looking bearish and oversold, which had hinted at a technical bounce towards the 200 day EMA.

The technical bounce occurred as expected, but stopped well short of the 200 day EMA due to strong resistance from the 7300 level. (At the time of writing this post, the index is hovering near the 7300 level - marked by purple horizontal line.)

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. MACD is about to cross above its signal line. RSI has bounced up after receiving support from the edge of its oversold zone. Slow stochastic has started to move up after forming an 'inverse head-and-shoulders' reversal pattern inside its oversold zone.

The 50 day EMA is falling towards its 200 day EMA. Both will provide resistance to the index if it tries to rally further. Despite last week's pullback, bears have retained their advantage.

On longer term weekly chart (not shown), the index closed below its 20 week EMA and 50 week EMAs but above its 200 week EMA in a long-term bull market. Weekly MACD and Slow stochastic are in bearish zones. RSI is showing downward momentum in bullish zone.

Sunday, February 18, 2018

Sensex, Nifty charts (Feb 16, 2018): bears remain on top

In a holiday-curtailed trading week, FIIs were net sellers of equity worth Rs 28.5 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 23.7 Billion.

For the second week in a row, Sensex and Nifty traded below the downward 'gaps' formed on Feb 5, but didn't lose much ground on a weekly closing basis.

India's wholesale inflation rose slower than expected in Jan '18. WPI eased to 2.84% YoY compared to 3.58% in Dec '17 due to lower food prices.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex consolidated sideways during the week. The failure to close above the 50 day EMA despite intra-day breaches three days in a row was a sign that bears are continuing to 'sell on rise'.

The fact that Sensex didn't fall inside the 'support/resistance zone' between 32550 and 33800 may provide some solace to bulls, but not for long.

Market sentiment shifted from extremely bullish to bearish due to re-introduction of LTCG tax. FIIs have voted with their feet. The PNB scam has further exacerbated bearish sentiment.

Technically, the 132 points 'gap' will be a tough resistance to overcome in the near-term. Even if the 'gap' gets filled (partly or fully), the down move should resume thereafter.

Support from the 33800 level has been tested twice already. A support (or resistance) level gets weakened by each subsequent test. That increases the probability of a fall inside the 'support/resistance zone' and a test of support from the 200 day EMA.

Daily technical indicators are looking bearish and a bit oversold. But don't expect any significant recovery before Apr '18, as investors are going to book profits till Mar 31 '18 to lock-in tax-free LTCG.

There are technical reasons for not being bullish in the near-term. The sideways consolidation during the past two weeks (below the 'gap') appears to be forming either a 'triangle' or a 'rectangle' pattern. Both patterns are typically continuation patterns. So, the more likely breakout is downwards.

Also, the huge Rs 128 Billion Tata Steel rights issue - at a discount to CMP - will remain open from Feb 14 to 28. That will squeeze out a lot of cash from the secondary market.

The long-term trend remains bullish, as the 200 day EMA is still rising and the index is trading above it. The correction is providing an opportunity for booking profits in small/mid-cap stocks and selectively entering large-caps. 

NSE Nifty index chart pattern



For the second straight week, the weekly bar chart pattern of Nifty traded below the 33 points downward 'gap' formed on Feb 5, and closed below the support level of 10490.

While that clearly shows bear domination, the index managed to close just above its 20 week EMA and well above its rising 50 week EMA in a long-term bull market.

Despite strong bearish sentiment and heavy selling by FIIs, the index has managed to hold ground because of steady inflows into domestic mutual funds.

Weekly technical indicators are beginning to turn bearish. MACD has crossed below its signal line and fallen from its overbought zone. ROC has crossed below its 10 week MA and is poised to enter bearish zone. RSI and Slow stochastic are seeking support from their respective 50% levels.

A fall below the 20 week EMA and a possible test of support from the 50 week EMA seems likely. Any attempt by the index to rally and close the 'gap' will bring bears to the fore.

Nifty's TTM P/E is at 25.32 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone, as bulls and bears have battled each other to a temporary stalemate. 

Bottomline? Sensex and Nifty charts are undergoing corrections after 13 months long bull rallies. The downward 'gaps' formed on Mon. Feb 5 are acting as resistance zones. Any pullbacks towards the 'gaps' may induce more selling and likely lower levels in both indices. Avoid bottom fishing.

Friday, February 16, 2018

Nifty Q3 Earnings Report Card: More Hits Than Misses

Nearly three-fourths of the Indian blue-chip companies in the country’s benchmark NSE Nifty 50 index reported financial results that matched or surpassed analyst estimates in the third quarter (ending Dec '17).
The Big Picture
  • Beat Estimates: 12
  • In line: 24
  • Miss Estimates: 13
Ambuja Cements Ltd. yet to report earnings.
Read more at:

Wednesday, February 14, 2018

Nifty chart: a midweek technical update (Feb 14, 2018)

FIIs were net sellers of equity worth Rs 15.4 Billion during Mon. Feb 12 and Wed. Feb 14 (Feb 13 was a holiday). DIIs were net buyers of equity worth Rs 11.9 Billion, as per provisional figures, but were net sellers today.

The Index of Industrial Production (IIP) at 7.1% showed good growth in Dec '17, but was lower than 8.8% in Nov '17. Low base effect was partly responsible for the growth. However, IIP was only 3.7% during Apr-Dec '17, compared to 5.1% during Apr-Dec '16.

India's retail (CPI) inflation fell a little to 5.07% in Jan '18 against 5.21% in Dec '17, as food inflation softened.


The following comments appeared in the previous midweek technical update on Nifty: "The 33 points downward 'gap' formed on Mon. Feb 5 can act as a resistance zone for future up moves. Also, any attempt to rally by the index will induce profit-booking by investors wishing to lock-in tax-free LTCG till Mar 31 '18."

The 'gap' is looming like a dark cloud for bulls. The 6 days of trading - after formation of the 33 points downward 'gap' on Feb 5 - has not only occurred below the 'gap' but also below the sliding 50 day EMA.

The falling 20 day EMA has slipped below the 'gap' today, and can also act as a resistance to any near-term rally. A re-test, and possible breach, of the Feb 6 intra-day low of 10276 seems quite likely.

Daily technical indicators are in bearish zones. MACD is showing downward momentum. RSI and Slow stochastic are moving sideways - hinting at more index consolidation below the 50 day EMA.

Nifty's TTM P/E has inched up to 25.37 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating at the edge of its oversold zone - hinting at some more consolidation or correction. 

Near-term bearish sentiment is increasing by the day as misfortunes keep befalling the market. First came the shock of the 10% LTCG tax. Then, news of Indian exchanges stopping data services to overseas stock exchanges in a misguided effort to tie down FIIs from fleeing.

Today's news of a Rs 110 Billion fraud involving at least four banks may be the proverbial straw that will break the camel's (FIIs?) back. [Warren Buffett had once commented: "There's never just one cockroach in the kitchen" about a scandal in Wells Fargo bank].

Small investors need not panic. Don't stop your SIPs. But refrain from bottom fishing because Nifty is nowhere near bottoming out yet.

Tuesday, February 13, 2018

WTI and Brent Crude Oil charts: prices tumble on rise in US output

WTI Crude Oil chart


Some consolidation or correction was expected in the previous post on the daily bar chart pattern of WTI Crude Oil, due to overbought technical indicators which were showing negative divergences.

Oil's price initially corrected to an intra-day low of 63.67 on Jan 31; bounced up after receiving support from its 20 day EMA, and closed higher - forming a 'reversal day' bar (lower low, higher close). 

By touching a lower top of 66.30 on Feb 2 and closing lower, oil's price formed a 'reversal day' bar (slightly higher high, lower close) and a small 'double top' reversal pattern.

That was a trigger for bears to go on the rampage. Oil's price dropped vertically below its 20 day and 50 day EMAs, with strong volumes, to an intra-day low of 58 on Fri. Feb 9 - falling nearly 12.5% in a week.

Daily technical indicators are looking bearish and a bit oversold. That led to a technical bounce on Mon. Feb 12, and the formation of an 'inverted hammer' candlestick pattern, which can cause a pullback towards the 50 day EMA.

Iran announced plans to boost production and US crude output hit record highs, adding to concerns about a sharp rise in global supplies.

On longer term weekly chart (not shown), oil's price pulled back sharply to its 200 week EMA and bounced up a little after receiving supportWeekly technical indicators are correcting overbought conditions and showing downward momentum. Some more correction is likely.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil closed just below its 20 day EMA on Jan 30, but formed a 'reversal day' bar (lower low, higher close) on Jan 31 and bounced up to touch an intra-day high of 70 on Feb 2.

Formation of another 'reversal day' bar (slightly higher high, much lower close) triggered a sharp correction below the 20 day and 50 day EMAs to an intra-day low of 61.77 - a fall of 13.3% from the Jan 25 high of 71.28.

Daily technical indicators are looking bearish and oversold. Oil's price formed an 'inverted hammer' candlestick pattern on Mon. Feb 12. A technical bounce is a possibility. 

Bears are likely to 'sell on rise'. A test of support from the 200 day EMA may be on the cards.

On longer term weekly chart (not shown), oil's price has pulled back sharply to its 200 week EMAWeekly technical indicators have corrected overbought conditions and are showing downward momentum - hinting at more correction.