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Saturday, October 31, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 30, 2015

FIIs turned net sellers during the week, with the bulk of their selling coming on the last trading day of the month (Oct 30). As per provisional figures, their net selling in equities touched Rs 1300 Crores.

Disappointing Q2 (Sep ‘15) results from FMCG majors – like ITC, Nestle, Colgate – and infra giant L&T seemed to spook FIIs.

DIIs more than matched FIIs with their net buying on Oct 30, but they were net sellers during the earlier part of the week.

What was the net result of all this buying and selling during F&O expiry week? Both Sensex and Nifty closed at their lowest levels in 4 weeks.

Modi government appears bogged down in fighting fires lit by irresponsible right wing groups. That didn’t stop the approval of 16 FDI proposals worth Rs 4700 Crores, and announcement of extra incentives for exporters in a belated bid to boost sliding exports.

BSE Sensex index chart

Sensex_Oct3015

The daily bar chart pattern of Sensex rose to test resistance from the blue down trend line on Mon Oct 26. The resistance proved too strong. The index formed a ‘reversal day’ pattern (higher high, lower close) that ended the 7 weeks long rally from the low of 24833 touched on Sep 8 ‘15.

The index closed lower on every single day of the week. In the process, it has dropped below its three EMAs and the ‘measuring gap’ into bear territory.

Bears were expected to put up a fight for a couple of reasons mentioned in last week’s post: overbought technical indicators, and proximity to the blue down trend line. As long as the index trades below the down trend line, bear domination will continue.

Daily technical indicators are looking bearish. MACD has crossed below its signal line and falling in positive zone. ROC has dropped inside negative zone. RSI has slipped below its 50% level. Slow stochastic is ready to enter its oversold zone.

Some more correction is likely. Bulls may be waiting for a trigger to fight back again. Will Bihar election results provide the trigger? Or, will a long-term support level at 26400 be a rallying point?

NSE Nifty 50 index chart

Nifty_Oct3015

The weekly bar chart pattern of Nifty faced twin resistance from the blue down trend line and a ‘breakaway gap’ between 8322 and 8360 (marked on Nifty’s daily bar chart in this post).

The index formed a ‘reversal week’ pattern (higher high, lower close) that ended the 800 points rally from the low of 7539 touched in the week ending on Sep 11 ‘15.

Nifty has closed below its two weekly EMAs and the ‘measuring gap’ in bear territory. Only a convincing move above the blue down trend line can bring bulls back in control of the chart.

Weekly technical indicators do not look encouraging for bulls. MACD has merged with its signal line, and moving sideways in negative zone. ROC is also moving sideways in negative zone. RSI is sliding down in negative zone. Slow stochastic is falling towards its 50% level.

Some more correction is likely.

Bottomline? Chart patterns of Sensex and Nifty faced strong resistance from their respective down trend lines. Bears fought back  to regain their initiative. Long-term bull markets are intact because both indices are trading well above their respective rising 200 week EMAs (not shown). Bulls need to work harder to regain control.

Wednesday, October 28, 2015

Will the Modi government be able to boost economic growth in the country? – a guest post

People of India are still waiting for ‘acchhe din’ promised by the Modi government. Some Jan Dhan Yojana bank account holders in Bihar are actually expecting Rs 15 Lakhs to be deposited in their accounts from the ‘kala dhan’ recovery.

Many programmes have been announced by the government. Critics call them populism and hype. Modi has candidly admitted that without creating hype things just don’t get done.

In this months guest post, Nishit lists out several initiatives undertaken by the Modi government that have already started achieving results. Subsidy leakage has been curtailed, and government’s coffers are filling up. India may not be too far away from ‘acchhe din’ after all.

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The Modi Government completes 18 months in office next month and the broader template for future growth is clear now. Whether Modi is re-elected or not for the next term may be a matter of debate, but he is delivering today. The first 40% of any project should be dedicated to proper planning. Proper planning makes life easier.

The key planning components in place are:

  1. Aadhaar Card as the primary document. This was an initiative taken by UPA and taken ahead by the NDA
  2. Self Attestation of documents. This again has been built on the foundations laid by the UPA Government
  3. Jan Dhan Bank Accounts. Once the accounts are in place, it is easy to transfer subsidy money into them
  4. Social Security net for those having lower income. The twin insurance schemes and the Atal Pension Scheme are master strokes. Those who make use of it will benefit
  5. Subsidies directly being transferred to Bank Accounts. UPA started this but made a mess of the implementation. Also, by playing on people’s sentiments to give up cooking gas subsidy, it is a very smart way to cushion against future oil price hikes
  6. Auctions for all natural resources. This does away with middlemen and both the States and Centre get a fair share of the money
  7. LED lights being distributed at subsidised rates. This has twin impact. The total consumption of electricity goes down. India is able to meet global emission targets and get plaudits abroad
  8. Make in India program given a fillip by LED lights. MNCs like Philips planning to set up LED manufacturing units in India
  9. Getting Railways to invest in infrastructure. By arranging for a lower interest rate loan by LIC, it ensures that infrastructure spending gets a boost. Also, Railways remain the owner of the land being developed
  10. Increasing the speed of building highways. This will lead to faster connectivity and also infrastructure spending will lead to more capital investments

The results of all these initiatives will be visible in another two years time. This is how Governments are supposed to run. There may be differences politically, but the policy continuity should be in place. Bihar elections may be a hiccup but those are very minor events in the overall big picture of things to come. Domestically, India is well placed. The raids on commodity hoarders are like icing on the cake.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

Tuesday, October 27, 2015

WTI and Brent Crude Oil charts: an update

WTI Crude chart

WTIC_Oct2615

The following comments were made in the previous post on the daily bar chart pattern of WTI Crude oil:

”Is the pullback to the top of the ‘triangle’ a buying opportunity? Not really. Note that volumes on the two down-days last week exceeded the volumes on the three up-days. That shows strong bear presence.”

Oil’s price hesitated for a few days near its entangled 20 day and 50 day EMAs before resuming its down trend. The previous low of 38 touched on Aug 24 is likely to be tested.

Daily technical indicators are in bearish zones and showing downward momentum. Oil’s price is falling below its three EMAs in a bear market.

On longer term weekly chart (not shown), oil’s price is trading below its three weekly EMAs in a long-term bear market. Weekly MACD and RSI remain in bearish zones, and are showing downward  momentum. Slow stochastic is about to cross below its 50% level.

Brent Crude chart

BRENT_Oct2615

The following comments appeared in the previous post on the daily bar chart pattern of Brent Crude oil:

“Note that oil’s price is trading well below its falling 200 day EMA in a bear market. So, the pullback towards the top of the ‘triangle’ is likely to become an ‘end run’ below the triangle.”

Oil’s price briefly sought support from its 20 day and 50 day EMAs before resuming its down move. The 42 level touched on Aug 24 may get tested and breached.

Daily technical indicators are in bearish zones and showing downward momentum. All three EMAs are falling and oil’s price is trading below them in a bear market.

On longer term weekly chart (not shown), oil’s price is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators remain in bearish zones and are showing downward momentum.

Monday, October 26, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 23, 2015

S&P 500 Index Chart

SPX_Oct2315

The daily bar chart pattern of S&P 500 faced resistance from the blue down trend line and dropped below its 200 day EMA midweek.

On Thu. Oct 22, the index crossed above its long-term moving average and the down trend line – accompanied by a spurt in volumes – and closed at a 2 months high.

The 20 day EMA has crossed above its 50 day EMA, and both EMAs are moving up. The ‘death cross’ (marked by blue oval) is likely to get negated soon by a ‘golden cross’ of the 50 day EMA above the 200 day EMA.

The 2 months long foray inside bear territory seems to be over. All three daily technical indicators are in bullish zones. MACD is rising inside its overbought zone. Slow stochastic is oscillating inside its overbought zone, and showing negative divergence by failing to touch a new high with the index.

Expect some consolidation or correction before the index can attempt to climb to a new high.

On longer term weekly chart (not shown), the index closed well above its three weekly EMA in a long-term bull market. Weekly technical indicators are looking bullish, and showing good upward momentum.

FTSE 100 Index Chart

FTSE_Oct2315

After breaking out upwards from a ‘rectangle’ pattern, the daily bar chart pattern of FTSE 100 consolidated sideways within a ‘triangle’ pattern – from which it broke out upwards on Fri. Oct 23 ‘15.

The 20 day EMA is about to cross above the 50 day EMA. The index needs to cross above its sliding 200 day EMA to return to bull territory. Bears will try to prevent that – though they appear to be steadily losing ground.

Daily technical indicators are in bullish zones, with MACD rising inside its overbought zone and RSI climbing towards its overbought zone.

However, Slow stochastic has dropped from its overbought zone and showing negative divergence by failing to touch a new high with the index.

On longer term weekly chart (not shown), the index managed to close above its 20 week and 200 week EMAs, but is below its 50 week EMA. Weekly MACD and RSI are still in bearish zones, but Slow stochastic has moved above its 50% level. A brief foray into a long-term bear market is about to end.

Saturday, October 24, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 23, 2015

FIIs remained bullish in a holiday-shortened trading week. Their net buying in equities crossed Rs 1600 Crores, as per provisional figures. DIIs kept bulls in check with their net selling of equity worth Rs 900 Crores.

IPOs have started to hit the market on a regular basis now. Coffee Day just managed to gather adequate subscription. A big IPO from Indigo Airline is awaited. That may divert capital from the secondary market.

Q2 (Sep ‘15) results declared so far have been mixed. Money is chasing the few companies that have positively surprised the market. Infrastructure, metal and capital goods companies are still under-performing.

BSE Sensex index chart

Sensex_Oct2315

The daily bar chart pattern of Sensex had formed an ‘inverse head and shoulders’ reversal pattern with a downward-sloping neckline (marked NL) below the ‘measuring gap’ that appeared on the chart on Aug 24 ‘15.

The subsequent breakout above NL was followed by a rally that completely filled the ‘measuring gap’. The index is currently facing resistance from a smaller 121 points ‘breakaway gap’ between 27443 and 27564 that appeared on Aug 21 ‘15.

This ‘breakaway gap’ was partly filled on Fri. Oct 23. Just above the ‘breakaway gap’ is the blue down trend line that has dominated the Sensex chart since the index touched its lifetime high of 30025 on Mar 4 ‘15.

The 20 day EMA has crossed above the 50 day EMA, and both EMAs are rising towards the 200 day EMA after forming bullish ‘rounding bottom’ patterns.

The index has closed above its three EMAs in bull territory for 5 straight trading days. All these signs indicate that bulls are gradually regaining control of the chart. A convincing cross above the blue down trend line will technically confirm the end of the long bull market correction.

Daily technical indicators are in bullish zones but looking overbought. Bears will try to put up a fight, as next week is F&O expiry week when bulls tend to lighten up on their positions.

Will the index be able to cross above the down trend line? The short answer is: Yes. Why? Because the ‘inverse head and shoulders’ pattern has an upward target of about 28000. (The down trend line is currently at about 27650.)

Won’t the bears defend the down trend line strongly – like they did back in Jul ‘15 and Aug ‘15? They may try, but the clearly formed ‘inverse head and shoulders’ reversal pattern – which usually forms at the end of a down trend – has changed the game in favour of bulls.

NSE Nifty 50 index chart

Nifty_Oct2315

The weekly bar chart pattern of Nifty closed higher for the 4th week in a row – closing above the ‘measuring gap’ formed on the chart in the week ending on Aug 28 ‘15 for the 2nd week in a row.

The index is facing resistance from a smaller ‘breakaway gap’ between 8322 and 8360 (marked on the daily bar chart in this post). Immediately above the ‘breakaway gap’, resistance can be expected from the blue down trend line.

The 20 week EMA dropped close to the 50 week EMA, but did not cross below it. Both EMAs have now resumed their up move after forming saucer-like ‘rounding bottom’ bullish patterns. The index closed above both its weekly EMAs in bull territory.

Weekly technical indicators are showing signs of bullishness. MACD has formed a bullish ‘rounding bottom’ pattern and crossed above its signal line in negative zone. ROC has crossed above its falling 10 week MA and is ready to emerge from its negative zone.

RSI is looking a bit bearish by slipping down after facing resistance from its 50% level. Slow stochastic is rising above its 50% level in bullish zone.

Volumes appear to be falling, but remember that last week had only 4 trading sessions due to the Dussehra holiday.

Bottomline? Chart patterns of Sensex and Nifty are on the verge of reversing their down trends. Bearish downward ‘gaps’ have been filled after formation of reversal patterns on daily charts. Long-term bull markets are intact, as both indices are trading well above their respective rising 200 week EMAs (not shown). Looks like ‘acchhe din’ for bulls are just around the corner.

Wednesday, October 21, 2015

Nifty chart: a mid-week update (Oct 21 ‘15)

The daily bar chart pattern of Nifty formed an ‘inverse head and shoulders’ reversal pattern and broke out upwards to completely fill the ‘measuring gap’ that had formed on the chart on Mon. Aug 24 ‘15.

The 20 day EMA has just crossed above the 50 day EMA, and both EMAs are moving up after forming bullish ‘rounding bottom’ patterns. Nifty has spent 4 trading sessions in a row above its 200 day EMA in bull territory.

The index is now facing resistance from a smaller ‘breakaway gap’ - between 8322 and 8360 - that formed on Fri. Aug 21 ‘15. Just above the ‘breakaway gap’ is the blue down trend line, which has been dominating the chart since Nifty touched its lifetime high of 9119 on Mar 4 ‘15.

Nifty_Oct2115

Will the index be able to cross the two hurdles – or will bears step in for a last ditch stand? The answer is: Yes to both, but in reverse order. In other words, bears are likely to put up a fight, but bulls may prevail.

Why? Because the long-term bull market is intact – as Nifty continues to trade well above its rising 200 week EMA (not shown). What we have witnessed since the Mar ‘15 top is a long bull market correction – which is coming to an end.

Couple of technical confirmations of a resumption of the bull market are still awaited – Nifty needs to cross above the blue down trend line; and the 20 day and 50 day EMAs need to cross above the 200 day EMA.

With FIIs back in ‘buy mode’ (though they were small net sellers of equity today), the technical confirmations should come sooner than later.

Daily technical indicators are correcting overbought conditions. MACD is above its signal line in positive zone, but its upward momentum has stalled. ROC has dropped from its overbought zone and crossed below it 10 day MA.

RSI fallen to the edge of its overbought zone. Slow stochastic has started correcting after forming a ‘double top’ reversal pattern inside its overbought zone.

Some more consolidation or correction is a possibility, and a drop into the ‘measuring gap’ can’t be ruled out. Bulls are likely to use any dips to buy.

Tuesday, October 20, 2015

Gold and Silver charts: an update

Gold chart pattern

GOLD_Oct1915

The daily bar chart pattern of gold broke out upwards from a ‘triangle’ pattern within which it consolidated for 7 weeks. There was no significant increase in volumes that would have technically validated the breakout.

After briefly facing resistance from its 200 day EMA, gold’s price crossed above its long-term moving average into bull territory with a volume surge on Oct ‘14.

However, it formed a ‘reversal day’ pattern (higher high, lower close) on the next day, and has pulled back to seek support from its 200 day EMA.

Daily technical indicators are correcting overbought conditions, but remain in bullish zones. RSI and Slow stochastic are showing negative divergences by failing to touch new highs with gold’s price.

Bears can be expected to push down gold’s price below its 200 day EMA.

On longer term weekly chart (not shown), gold’s price faced resistance from its 50 week EMA, and closed well below its 200 week EMA in a long-term bear market. MACD is moving up in negative zone. RSI crossed above its 50% level but has turned down. Slow stochastic has entered its overbought zone.

Silver chart pattern

SILVER_Oct1915

After breaking out upwards from a ‘triangle’ pattern within which it had consolidated for 6 weeks, the daily bar chart pattern of silver continued its bear market rally to cross above its 200 day EMA.

However, silver’s price has been struggling to convincingly cross above its long-term moving average, and has formed a bearish ‘rising wedge’ pattern. Bears are likely to use the opportunity to sell.

Daily technical indicators are correcting overbought conditions. MACD and Slow stochastic are moving down inside their overbought zones. RSI is falling towards its 50% level.

On longer term weekly chart (not shown), silver’s price moved above its 20 week EMA, but faced strong resistance from its 50 week EMA. It is trading well below its falling 200 week EMA in a long-term bear market. MACD is moving up in negative zone. RSI crossed above its 50% level but has turned down. Slow stochastic has entered its overbought zone.

Monday, October 19, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 16, 2015

S&P 500 Index Chart

SPX_Oct1615

The daily bar chart pattern of S&P 500 appears to have formed a ‘double bottom’ reversal pattern. A smart rally followed, and has taken the index to a close above its three EMAs in bull territory after nearly 2 months.

Is the brief foray into bear territory over? That may be a little early to call. Why? Because a condition for technical validity of a ‘double bottom’ pattern is a sharp increase in volumes to support the rally following the formation of the second bottom.

Though volumes were strong, they seem to be tapering down. Also, the down trend from the Jul 20 ‘15 top (marked by blue down trend line) has not been reversed yet. Bears can be expected to fight back at any time.

Daily technical indicators are in bullish zones, but MACD and Slow stochastic are looking overbought. MACD is showing positive divergence by touching a 6 months high. Slow stochastic is showing negative divergence by failing to touch a new high with the index.

Expect some consolidation or correction before the index decides on its next move. Odds may be favouring an up move.

On longer term weekly chart (not shown), the index closed just above its 20 week and 50 week EMAs and is trading well above its rising 200 week EMA in a long-term bull market. Weekly technical indicators are in bearish/neutral zones, but showing good upward momentum.

FTSE 100 Index Chart

FTSE_Oct1615

The daily bar chart pattern of FTSE 100 broke out upwards from a ‘rectangle’ pattern within which it was trading since end-Aug ‘15.

The breakout was supported by an increase in volumes (not shown on chart) that provided technical validity to the breakout. As often happens, the index subsequently pulled back towards the top of the ‘rectangle’ before resuming its rally.

So, is this a good buying opportunity? The answer is: Not yet. Why? Because the index continues to trade below its falling 200 day EMA in a bear market. The strategy to follow in a bear market is to ‘sell on rallies’.

Daily technical indicators are in bullish zones, but MACD and Slow stochastic are looking overbought. Some more upside is possible, but expect the 200 day EMA to provide strong resistance.

On longer term weekly chart (not shown), the index managed to close above its 200 week EMA for a week, but slipped down below all its three weekly EMAs after facing resistance from its falling 20 week EMA. Weekly MACD and RSI are in bearish zones, but Slow stochastic has moved above its 50% level.

Saturday, October 17, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 16, 2015

Exports fell by 24.3% YoY to $21.84 Billion in Sep ‘15. It was the 10th month of degrowth in a row due to weak global demand. Imports also fell - by 25.4% YoY to $32.32 Billion. Trade deficit narrowed to $10.48 Billion from $12.5 Billion in Aug ‘15.

Bullish sentiment is returning to the stock market. FIIs were net buyers of equity on all 5 days of the week. As per provisional figures, their net buying almost touched Rs1450 Crores. DIIs were net sellers of equity worth Rs450 Crores, but were net buyers during the last 2 days of the week.

Reliance declared a decent set of numbers for Q2 (Sep ‘15), but it is unlikely to affect the stock price too much as the top line dropped sharply. A few companies that declared good results faced selling pressure as the numbers were lower than market expectations.

Expect better results from India Inc. from Q3 onwards – as a lower base-effect will also come into play.

BSE Sensex index chart

Sensex_Oct1615

The daily closing chart pattern of Sensex has nearly reversed its 9 months long down trend. After forming an ‘inverse head and shoulders’ reversal pattern with a downward-sloping neckline, the index broke out upwards into the ‘gap’ zone (formed on the daily bar chart on Aug 24 ‘15).

The 200 day EMA provided strong resistance inside the ‘gap’ zone. The index corrected down to the lower edge of the ‘gap’ before bouncing up to close above all its three EMAs and the upper edge of the ‘gap’ in bull territory.

Note that the close above the ‘gap’ isn’t a convincing one yet (i.e. Sensex is within the 3% ‘whipsaw’ limit). Also, the long-term ‘support-resistance zone’ between 27350 and 28800 is looming overhead. Bears may use the opportunity to fight back.

Complete filling of the ‘gap’ was the first condition for bulls to start regaining lost ground. That milestone has been covered. The ‘support-resistance zone’ will be the next big hurdle that the index will need to cross before the bull market can resume in right earnest.

Daily technical indicators are in bullish zones but looking a little overbought. Also, ROC and Slow stochastic are showing negative divergences by failing to touch new highs with the index.

Expect some consolidation or correction as Sensex tries to re-enter the ‘support-resistance zone’ (marked by dotted horizontal lines) after nearly 2 months.

If you are planning to enter the market, but not sure which stocks to buy, start a SIP in a good balanced fund.

NSE Nifty 50 index chart

Nifty_Oct1615

The weekly bar chart pattern of Nifty closed higher for the 3rd week in a row – managing to close just above the ‘gap’ formed on the chart in the week ending on Aug 28 ‘15.

The ‘gap’ – which had acted as a resistance zone to the index for 6 weeks in a row - has now been completely filled. That will enthuse bulls to attempt a reversal of the down trend from the Mar ‘15 top by crossing above the blue down trend line.

Expect bears to put up a fight to defend the zone between the down trend line (now at 8430) and the upper edge (8630) of the long-term ‘support-resistance zone’ (marked by dotted horizontal lines).

Weekly technical indicators are showing signs of bullishness. MACD has formed a bullish ‘rounding bottom’ pattern and moved up to touch its falling signal line in negative zone. ROC is touching its falling 10 week MA and is poised to emerge from its oversold zone.

RSI is making an attempt to cross above its 50% level. Slow stochastic has just crossed above its 50% level to enter bullish zone.

Volumes have dipped during the past week, which raises some concerns about the immediate sustainability of the rally. Dussehra holiday next week may also keep a check on bullish fervour.

Bottomline? Chart patterns of Sensex and Nifty are still in down trends, but bearish downward ‘gaps’ have been filled after formation of reversal patterns on daily charts. Long-term bull markets remain intact. If you are still waiting for another down leg of correction to start buying, you may have to wait for a long time.

Wednesday, October 14, 2015

Nifty chart: a mid-week update (Oct 14 ‘15)

The IIP number of 6.4% in Aug ‘15 came as a positive surprise – much higher than 4.1% in Jul ‘15 and the highest since Oct ‘12 – showing clear signs of growth in manufacturing.

Inflation climbed up a bit, but was well under control. CPI inflation was 4.4% in Sep ‘15 against 3.7% in Aug ‘15. WPI inflation was –4.54% in Sep ‘15 against –4.95% in Aug ‘15. Higher food prices were offset by lower fuel prices.

Q2 (Sep ‘15) results from Infosys, TCS, HUL, IndusInd Bank were very good, but belied market expectations. FIIs have turned bulls. As per provisional figures, their net buying in equities has exceeded Rs 700 Crores this week. DIIs were net sellers worth Rs 650 Crores.

Nifty_Oct1415

The daily bar chart pattern of Nifty completed an ‘inverse head and shoulders’ reversal pattern and broke out upwards to completely fill the ‘measuring gap’ formed on the chart on Aug 24 ‘15.

The upper edge (8225) of the ‘gap’ acted as a strong resistance level. The index is undergoing a pullback towards the lower edge (8060) of the ‘gap’ – which also happens to be the ‘neckline’ of the ‘inverse head and shoulders’ pattern.

There are three possible moves Nifty can make from here in the near term:

  1. Continue its correction – as often happens after filling of a downward ‘gap’
  2. Bounce up after receiving support from the lower edge (8060) of the ‘gap’ and resume its rally
  3. Consolidate within the ‘gap’ area till Diwali – by which time most of the Q2 (Sep ‘15) results of India Inc. will be announced and digested by the market

So, which option will Nifty choose? Anyone who knows the answer to that question can make some serious money!

Let us try some ‘guesstimates’. Under ‘normal’ circumstances, my vote will go to option 1. But this is not a ‘normal’ circumstance due to the formation of a clearly visible reversal pattern immediately below the ‘gap’.

That increases the possibility of option 2 – or, option 3 followed by option 2. The long-term bull market is intact because Nifty is trading more than 1100 points above its rising 200 week EMA (not shown).

Daily technical indicators are in the process of correcting overbought conditions. MACD is moving sideways above its rising signal line in positive territory. ROC faced resistance from the edge of its overbought zone, and is about to cross below its rising 10 day MA.

RSI is facing resistance from the edge of its overbought zone. Slow stochastic is about to drop down from its overbought zone. Expect Nifty to consolidate or correct a little more.

If you are itching to enter the market, place small bets instead of going ‘all in’. The stock market will be there tomorrow and the day after and the week after and the month after. There will always be opportunities to make money.

Tuesday, October 13, 2015

WTI and Brent Crude Oil charts: false breakouts from triangles?

WTI Crude chart

WTIC_Oct1215

The daily bar chart pattern of WTI Crude oil consolidated sideways within a ‘symmetrical triangle’ pattern for almost 5 weeks before breaking out upwards on Oct 6 ‘15.

Oil’s price rallied for the next 3 days to touch an intra-day high of 51 on Oct 9, but formed a ‘reversal day’ pattern (higher high, lower close) that appears to have terminated the rally from the Aug 24 low.

On Oct 12, oil’s price dropped sharply towards the top of the ‘triangle’, but managed to close above its 20 day and 50 day EMAs.

Is the pullback to the top of the ‘triangle’ a buying opportunity? Not really. Note that volumes on the two down-days last week exceeded the volumes on the three up-days. That shows strong bear presence.

Also, oil’s price closed well below its falling 200 day EMA in a bear market. The ‘gap’ that formed on the chart in early July has not been tested yet. Bears will dominate till the ‘gap’ is convincingly filled.

Daily technical indicators are in bullish zones, but turning bearish. MACD has turned down after facing resistance from the edge of its overbought zone. RSI formed a ‘double top’ reversal pattern and is falling towards its 50% level. Slow stochastic has dropped down from its overbought zone.

On longer term weekly chart (not shown), oil’s price managed to close above its falling 20 week EMA last week before slipping down, and is trading below its three weekly EMAs in a long-term bear market. Weekly MACD and RSI remain in bearish zones, and are showing negative divergences by failing to touch a new high with oil’s price. Slow stochastic has just crossed above its 50% level.

Brent Crude chart

BRENT_Oct1215

The daily bar chart pattern of Brent Crude oil broke out sharply above a sideways consolidation within a ‘triangle’ pattern with good volume support on Oct 6 ‘15.

Oil’s price crossed above 54 intra-day on Oct 9, but formed a ‘reversal day’ pattern (higher high, lower close) that extinguished any bullish hopes and ended the rally from the Aug 24 low.

On Oct 12, oil’s price dropped sharply with a volume spike towards the top of the ‘triangle’, but found support from its 20 day EMA and managed to close above its 20 day and 50 day EMAs.

Note that oil’s price is trading well below its falling 200 day EMA in a bear market. So, the pullback towards the top of the ‘triangle’ is likely to become an ‘end run’ below the triangle.

Daily technical indicators are in bullish zones, but turning bearish. MACD is moving sideways in positive zone. RSI is falling sharply towards its 50% level. Slow stochastic has dropped down from its overbought zone.

On longer term weekly chart (not shown), oil’s price faced resistance from its 20 week EMA, and is trading below its three weekly EMAs in a long-term bear market. Weekly technical indicators corrected oversold conditions but remain in bearish zones.

Saturday, October 10, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 09, 2015

Indirect tax collections (from service tax, customs and excise duties) rose nearly 36% during Apr-Sep ‘15 – to Rs 3.24 Lakh Crores from Rs 2.38 Lakh Crores during Apr-Sep ‘14 - giving a boost to the government’s coffers. The budget had estimated a 19% growth.

In another sign of improving economic activity, commercial vehicle sales rose 12% in Sep ‘15 on a YoY basis while passenger vehicle sales rose nearly 10%. However sales of utility vehicles, 2 and 3 wheeler sales dipped.

FIIs have resumed buying in equities. As per provisional figures, their net buying touched Rs 1500 Crores last week. DIIs turned net sellers of equity worth Rs 950 Crores.

BSE Sensex index chart

Sensex_Oct0915

The daily closing chart pattern of Sensex is making an honest attempt to reverse a 9 months long down trend.

The index formed a complicated ‘inverse head and shoulders’ reversal pattern (whose left and right shoulders were small ‘double bottom’ reversal patterns and the head was itself a small ‘inverse head and shoulders’ pattern) with a downward-sloping neckline.

An expected upward breakout from the pattern was followed by a rally past its 20 day and 50 day EMAs (both of which have formed bullish ‘rounding bottom’ patterns) and a part-filling of the ‘measuring gap’ formed in Aug 24 ‘15 in the daily and weekly bar charts.

Note that the index is facing strong resistance from its 200 day EMA, which is just below the upper edge of the ‘measuring gap’. A complete filling of the ‘gap’ on closing basis will be the first requirement for bulls to regain some control over the chart.

However, bears will be in no mood to give up easily. Just above the ‘gap’ is the long-term ‘support-resistance zone’ between 27350 and 28800. Sensex has failed to close above this zone since Apr ‘15.

Daily technical indicators are looking bullish and a little overbought. MACD is rising above its signal line in positive zone. ROC has entered its overbought zone. RSI is moving sideways just below its overbought zone. Slow stochastic is well inside its overbought zone.

RSI and Slow stochastic are showing negative divergences by failing to touch a new high with the index. Expect the index to go through some consolidation or correction.

Can the index resume its down trend and fall below the ‘head’ of the ‘inverse head and shoulders’ pattern? The possibility can’t be ruled out – specially if you are an ardent follower of Elliott Waves.

But the probability of such an event is low because of the formation of (and an upward breakout from) a clearly visible reversal pattern. The closing level (24894 on Sep 7) of the ‘head’ should be a near-term bottom for the index.

Time to start picking up stocks from your ‘buy list’.

NSE Nifty 50 index chart

Nifty_Oct0915

The weekly bar chart pattern of Nifty had spent 6 straight weeks below the rare weekly ‘gap’ formed on the chart in the week ending on Aug 28 ‘15. It finally moved up to close the ‘gap’ last week.

Though the index failed to close above the ‘gap’, it managed to close just above the lower edge of the long-term ‘support-resistance zone’ between 8180 and 8360 – and above its 20 week and 50 week EMAs in bull territory.

In a full week of trading after three holiday-shortened weeks, volumes picked up considerably. Weekly technical indicators are still in bearish zones, but showing signs of upward momentum.

Bulls have their work cut out. Expect overhead resistances from the upper edge of the ‘measuring gap’, the blue down trend line and the 8630 level.

Bottomline? Chart patterns of Sensex and Nifty remain in down trends but bearish ‘measuring gaps’ are on the verge of getting filled. Further down sides can’t be ruled out entirely, but upward breakouts from reversal patterns formed on daily charts are indications that the corrections are over. Long-term bull markets are intact. This is a good time to add/enter.

Wednesday, October 7, 2015

Nifty chart: a mid-week update (Oct 07 ‘15)

After heavy selling in the previous 2 months, FIIs have turned net buyers of equity. During the first 4 trading days in Oct ‘15, their net buying has been worth Rs 1125 Crores, as per provisional figures. DIIs have been net sellers of equity worth Rs 125 Crores.

Monsoon has withdrawn from most parts of the country. Rainfall deficiency – though acute in a few pockets – has been more or less within the ‘normal’ range. Rural consumption should not get affected too much.

Anecdotal evidence suggests that government spending on infrastructure is picking up. It may be too late to get reflected in Q2 (Sep ‘15) results of India Inc. Expect better results in Q3 and Q4.

Nifty_Oct0715

The daily bar chart pattern of Nifty had fallen below the long-term ‘support-resistance zone’ between 8180 and 8630 with a 165 points downward ‘measuring gap’ on Aug 24 ‘15.

The subsequent ‘death cross’ (marked by light blue circle) of the 50 day EMA below the 200 day EMA had technically confirmed a bear market.

The index has completed the formation of an ‘inverse head and shoulders’ reversal pattern – with the lower edge of the ‘measuring gap’ as its neckline.

By climbing above the neckline with good volume support, the index has partly filled the ‘gap’ - but is facing twin resistance from its 200 day EMA and the 8180 level (lower edge of the ‘support-resistance zone’).

Daily technical indicators are in bullish zones but beginning to show some weakness. MACD has entered positive zone. ROC is moving sideways in positive zone, and showing negative divergence by touching a lower top.

RSI has turned down after facing resistance from the edge of its overbought zone. Slow stochastic is well inside its overbought zone.

Is the 7 months long correction from the Mar ‘15 lifetime high of 9119 finally over? It would appear so. However, expect bears to remain in the picture till the index can completely fill the ‘measuring gap’ and convincingly cross above the 8630 level (upper edge of the ‘support-resistance zone’).

That can only happen after some consolidation - provided that FIIs continue their net buying.

Remain cautiously optimistic but try not to jump in feet first.

Tuesday, October 6, 2015

Gold and Silver charts: consolidating sideways in bear markets

Gold chart pattern

Gold_Oct0515

The daily bar chart pattern of gold has been consolidating sideways for the past 6 weeks within a ‘triangle’ pattern and oscillating about its 20 day and 50 day EMAs. Since a ‘triangle’ is an unreliable pattern, a breakout can occur in either direction.

Down days have outnumbered up days, but volumes have been strong on a couple of recent up days – indicating some buying interest at lower levels.

However, gold’s price continues to trade below its sliding 200 day EMA in a bear market. Every attempt at a rally has been facing bear selling.

Daily technical indicators are looking mildly bullish. MACD has crossed above its signal line in positive zone. RSI moved above its 50% level but its upward momentum has stalled. Slow stochastic has risen to its 50% level.

On longer term weekly chart (not shown), gold’s price faced resistance from its 20 week EMA, and closed below all three weekly EMAs in a long-term bear market. MACD and RSI are in bearish zones. Slow stochastic has moved above its 50% level, but its upward momentum is weakening.

Silver chart pattern

Silver_Oct0515

The daily bar chart pattern of silver broke out upwards with good volume support after spending 6 weeks in a sideways consolidation within a ‘triangle’ pattern.

The rally stalled after touching a high of 15.75. Silver’s price closed below its 200 day EMA in a bear market.

All three daily technical indicators are in bullish zones, and showing good upward momentum. Silver’s price may move up further to test resistance from its 200 day EMA. Expect bear selling to start at any time.

On longer term weekly chart (not shown), silver’s price closed above its 20 week EMA, but is trading below its 50 week and 200 week EMAs in a long-term bear market. RSI and Slow stochastic are in bullish zones, but MACD is still in bearish zone. All three are showing upward momentum.

Monday, October 5, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 02, 2015

S&P 500 Index Chart

SPX_Oct0215

After falling sharply below a bearish ‘rising wedge’ pattern, the daily bar chart pattern of S&P 500 touched an intra-day low of 1872 on Sep 29 (slightly higher than the Aug ‘15 low of 1867), formed a ‘reversal day’ bar and rallied on good volumes to close above its 20 day EMA and the 1950 level with a 1% gain on a weekly closing basis.

Bulls may have won last week’s battle, but continue to lose ground in the longer-term war. The index is trading well below its 50 day and 200 day EMAs in a bear market that was technically confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA.

Daily technical indicators are in bearish zones but showing good upward momentum. MACD has crossed above its signal line and making another attempt to emerge from its oversold zone. RSI and Slow stochastic are rising towards their respective 50% levels. The rally may continue a bit longer – but bears may resume their selling soon.

On longer term weekly chart (not shown), the index closed below its falling 20 week and 50 week EMAs for the 7th week in a row, but is trading above its rising 200 week EMA in a long-term bull market. The 20 week EMA has crossed below the 50 week EMA for the first time in more than 3 years. Weekly technical indicators are in bearish zones, but their downward momentum have stalled.

FTSE 100 Index Chart

FTSE_Oct0215

The 'rectangle' pattern, within which the daily bar chart pattern of FTSE 100 has been trading for more than a month, has been redrawn to reflect last week's trading and a broader consolidation zone. (Such redrawing is often necessary to represent the changing technical structure.)

The index breached the lower edge of the 'rectangle' on Sep 29 by touching an intra-day low of 5877, but bounced up on good volume support to close the week with a small 21 points gain.

A 'rectangle' is usually a continuation pattern. Since the index entered it from above, the eventual breakout should be downwards. However, 'rectangle' patterns are unreliable. It is advisable to wait for the breakout before initiating long or short positions.

Note that the index is trading well below its falling 200 day EMA in a bear market. So, the odds of a downward breakout are better.

Daily technical indicators are showing good upward momentum, but only Slow stochastic has managed to enter bullish zone. MACD is trying to emerge from its oversold zone. RSI has reached its 50% level. Any further rally is likely to face twin resistances from the upper edge of the 'rectangle' and the falling 50 day EMA.

On longer term weekly chart (not shown), the index closed well below its three weekly EMAs for the 7th week in a row, and has probably entered a long-term bear market. Weekly technical indicators are in bearish zones, but their downward momentum have stalled.

Saturday, October 3, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Oct 01, 2015

For the second month in a row, and in 4 of the past 5 months, FIIs were net sellers of equity due to a variety of reasons – poor monsoon, poor earnings of India Inc., possible interest rate hike in USA, poor growth in China. DIIs have been net buyers of equity in every month since Feb ‘15.

Can India become the next China for global investors? PM Modi is certainly hoping so, and timed his visit to Ireland and USA accordingly. India’s slow but steady growth based on domestic consumption, low inflation, a huge young workforce may finally get the global attention it deserves.

There was mixed news on the economic front. Passenger vehicle sales in Sep ‘15 grew 4.6% on a YoY basis, with Maruti, Hyundai, Honda and Ford being leaders and M&M, Toyota, Tata Motors being laggards. 2-wheeler sales were marginally lower. Manufacturing PMI in Sep ‘15 slipped to a 7 months low of 51.2 from 52.3 in Aug ‘15 (a figure above 50 indicates growth).

BSE Sensex index chart

Sensex_Oct0115

The daily closing chart pattern of Sensex has been trading in a bear market since the sharp fall with a downward ‘gap’ on Aug 24 ‘15. The ‘death cross’ (marked by light blue circle) of the 50 day EMA below the 200 day EMA technically confirmed a bear market.

There is hope of a turnaround for bulls. The index has formed a complicated ‘inverse head and shoulders’ reversal pattern. Why complicated? Because the left and right shoulders (marked LS and RS respectively) are themselves small ‘double bottom’ reversal patterns and the Head is itself a small ‘inverse head and shoulders’ reversal pattern.

The downward-sloping neckline (marked NL) of the pattern has been breached upwards, but not convincingly yet. Overhead resistances from the falling 50 day and 200 day EMAs and the ‘measuring gap’ should prevent a bull rally from running away.

However, a ‘reversal pattern’ is clearly visible and should be respected. So, it will be advisable not to short the index.

Daily technical indicators are turning bullish, but three of them – ROC, RSI, Slow stochastic – are showing negative divergences by touching lower tops. MACD is above its signal line, and both are rising in negative territory. ROC has crossed above its rising 10 day MA in positive territory. RSI is showing a bit of weakness by turning down towards its 50% level. Slow stochastic is moving up towards its overbought zone.

Expect some consolidation or correction before the index can start rallying.

RBI Governor gave an early Diwali bonus with an unexpected 50 bps cut in interest rates. Banks have been coaxed to transmit the bulk of the cut to its base lending rates. Rate sensitive sectors, including capital goods, consumer discretionary and infrastructure should benefit.

This may be a good time to start accumulating fundamentally strong stocks.

NSE Nifty 50 index chart

Nifty_Oct0115

The weekly bar chart pattern of Nifty has spent 6 straight weeks below the rare weekly ‘gap’ formed on the chart in the week ending on Aug 28 ‘15. The 20 week and 50 week EMAs are touching each other and sliding down. The index is trading below them in bear territory.

However, the index closed nearly 1000 points above its rising 200 week EMA (not shown). That means the long-term bull market is intact, though bears continue to dominate the chart in the near term. (Awareness and appreciation of the effect of different time frames on price charts will enable better decision making.)

Weekly technical indicators are in bearish zones but their downward momentum is slowing down. MACD is falling below its signal line in negative territory. ROC is again trying to emerge from its oversold zone, but remains below its sliding 10 week MA. RSI has started to move down after facing resistance from its 50% level. Slow stochastic is moving up after receiving support from the edge of its oversold zone.

Transaction volumes appear low during the past three weeks due to holidays. Volumes should pick up soon.

Bulls have a lot of work to do before the index can resume its up move. The ‘gap’ needs to be filled and the blue down trend line needs to be crossed convincingly. That can happen only if the FIIs stop selling.

Bottomline? Chart patterns of Sensex and Nifty are in down trends and are trading below bearish ‘gaps’. Daily charts have formed trend reversal patterns. Long-term bull markets are still intact. The long correction has provided an opportunity to enter good stocks at fair prices. Use it.