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Wednesday, November 19, 2014

Nifty chart: a mid-week update (Nov 19 ‘14)

DIIs have been relentless sellers of equity this month. FII buying has ensured that Nifty’s sideways consolidation continues with an upward bias. Today’s slight correction followed the formation of a small ‘double top’ pattern (at a new lifetime high of 8455).

The government is trying to push through share divestments in Coal India and ONGC by the end of this calendar year to raise about Rs 40000 Crores. That may be the motivation for DIIs to sell.

Trade deficit during Oct ‘14 eased a little from the previous month, but remained high. Exports slid while imports rose – mainly due to a spike in gold imports. The Rupee slumped to its lowest level in more than 8 months against the US Dollar.

Credit off-take in banks remain sluggish, which is affecting their interest income. With liquidity at comfortable levels, some banks have been forced to lower interest rates on fixed deposits. This may be a good time to lock some market profits in bank FDs before rates fall further.

Nifty_Nov1914

Nifty is trading above its three rising EMAs – which is the sign of a bull market. However, all four technical indicators have started correcting overbought conditions, and are showing negative divergences by failing to touch new highs with the index.

MACD is moving down towards its rising signal line just below its overbought zone. ROC is falling below its 10 day MA, and looks poised to enter negative territory. RSI and Slow stochastic are inside their respective overbought zones, but have started to slide down.

Expect the sideways consolidation to continue a while longer. In case Nifty decides to correct a bit, down side support can be expected from the 8180 level (marked by blue dotted horizontal line).

Despite bullish sentiments and brokerage estimates of ever higher Nifty levels, real money will be made by being circumspect and waiting for good opportunities to enter. That means buying on dips (or through a SIP - for those not adept at market timing).

The best thing to do near a market top is to get rid of non-performers in one’s portfolio when there are buyers aplenty.

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