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Wednesday, August 5, 2015

Nifty chart: a mid-week update (Aug 05 ‘15)

RBI Governor kept interest rates unchanged during Tuesday’s policy meeting. A sell-off ensued as some market players were hoping against hope for a 25 bps rate cut.

The overall monsoon rainfall during Jun & Jul ‘15 have been deficient by about 5%. If rains during Aug ‘15 is also deficient, expect food prices to rise and stoke inflation.

As per provisional figures, FIIs have been net buyers of equity worth Rs 920 Crores during the first three trading days of Aug ‘15. DIIs have been net sellers of equity worth Rs 330 Crores.

Q1 (Jun ‘15) results continue to show bottom line pressure, though there have been a few exceptions. Manufacturing growth has just begun to pick up.

Nifty_Aug0515

The daily bar chart pattern of Nifty dropped down below its 20 day EMA intra-day on Tue. Aug 4 but bounced up on strong volume support to close higher today.

The index is approaching the resistance zone between 8630 and 8670 (mentioned in a previous post). Expect bears to put up a fight. Once 8670 is crossed convincingly, the index may run away to touch a new high.

Daily technical indicators are painting a mixed picture. MACD has moved up to touch its falling signal line in positive zone – which is mildly bullish. ROC faced resistance from its sliding 10 day MA and failed to enter positive zone – which is slightly bearish.

RSI is also looking a bit bearish by slipping below its 50% level. Slow stochastic has climbed above its 50% level, which is a bullish sign, but its upward momentum is decelerating.

All three EMAs are rising and Nifty is trading above them in a bull market. The index appears to be forming a ‘rounding bottom’ or a ‘cup and handle’ pattern.

If either pattern plays out, Nifty can touch 10000 in the near future. Any fall below the Jun ‘15 low of 7940 can lead to a drop to 7500 – however remote the possibility may seem now.

In other words, be very cautious about betting the ranch on ‘sure shot’ or ‘can’t fail’ type of stocks.

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