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Wednesday, June 11, 2014

Nifty chart: a mid-week update (Jun 11 ‘14)

A weaker Rupee and return of economic growth in USA and Europe led to a 12.4% increase in exports in May ‘14 (over May ‘13). Gold imports fell a whopping 72%. But oil imports ensured that trade deficit increased to $11.23 Billion from $10.09 Billion in Apr ‘14.

The new NDA government has made all the right noises so far. That has kept market sentiment bullish if not euphoric. Retail investors are still exiting at every rise, and may end up missing the next leg of the rally.

The budget is just about a month away. The available time is too short to remove all the economic ills of the previous decade in one go. What will be interesting to watch is how the government prioritises its actions for course correction.

Nifty_Jun1114 

The upward ‘gap’ formed on May 13 ‘14, continues to remain unfilled, and may not get filled in a hurry. Why? Because immediately above the ‘gap’ is a consolidation pattern called a ‘flag’, from which the index has broken out upwards with good volume support.

Such upward break outs are often followed by pullbacks towards the break out point, i.e. the top of the ‘flag’. The pullback process has started already, and should receive twin support from the top of the ‘flag’ (at about 7400) and/or the rising 20 day EMA.

Daily technical indicators have started correcting overbought conditions. MACD and Slow stochastic are still inside their respective overbought zones, but have stopped rising. ROC and RSI are about to drop from their overbought zones.

A correction of 100-200 points will improve the technical ‘health’ of the chart, enabling Nifty to move up towards the psychological target of 8000.

FIIs were in profit-booking mode today, along with DIIs. Stay invested or use the dip to add.

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