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Monday, November 30, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 27, 2015

S&P 500 Index Chart

S&P 500_Nov2715

In a trading week truncated by Thanksgiving holiday, the daily bar chart pattern of S&P 500 consolidated sideways and closed flat for the week.

The index is trading above all three EMAs, but needs to climb above the Nov 3 top of 2116 to maintain a bullish pattern of ‘higher tops and higher bottoms’.

A drop below the Nov 16 low of 2019 – which may seem unlikely at this stage - will bring bears back to the fore.

Daily technical indicators are in bullish zones. MACD and RSI are moving sideways. Slow stochastic has entered its overbought zone.

Volumes tapered off in the week gone by. But that is often the case during Thanksgiving week.

On longer term weekly chart (not shown), the index closed flat for the week, but above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones.

FTSE 100 Index Chart

FTSE_Nov2715

The daily bar chart pattern of FTSE 100 climbed above its 20 day and 50 day EMAs after a brief fall during the first two days of the week, but faced resistance from the 6400 level.

The index closed 40 points higher for the week but remains 120 points below its sliding 200 day EMA in a bear market.

Daily technical indicators are in bullish zones, but MACD and RSI are not showing any upward momentum. However, Slow stochastic has climbed sharply inside its overbought zone.

On longer term weekly chart (not shown), the index continued its pullback towards its 200 week EMA, but failed to close above it. The 20 week EMA is about to cross below the 200 week EMA. The ‘death cross’ of the 50 week EMA below the 200 week EMA is still awaited. Weekly MACD and RSI are in bearish zones but showing upward momentum. Slow stochastic has bounced up after receiving support from its 50% level.

Saturday, November 28, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 27, 2015

Bulls were active in a truncated F&O settlement week. Both Sensex and Nifty closed 1% higher for the second week in a row – ending the intermediate down trend within a larger down trend.

FIIs remained bears – as they have been for most of the month. Their net selling during the week was nearly Rs 1500 Crores, as per provisional figures. DIIs were bulls. Their net buying was almost Rs 2500 Crores, and propelled the market higher.

Prime Minister’s efforts at a reconciliation with the opposition Congress party – with a view to getting the contentious GST bill passed in both houses of Parliament – seemed to boost bullish sentiments.

BSE Sensex index chart

Sensex_Nov2715

The daily closing chart pattern of Sensex touched a higher bottom – breaking the bearish pattern of ‘lower tops and lower bottoms’ that had dominated the chart since Mar ‘15.

Is the 9 months long corrective phase over? It would seem so – though it may be a bit early to call. The clearly formed ‘inverse head and shoulders’ pattern gave the first hint of an end to the down trend.

The fact that the index took support at the extended neckline (NL) and touched a higher bottom is another bullish signal. But bulls still have a lot of work left.

The index is facing resistance from its 20 day EMA. It needs to cross above its three EMAs and the blue down trend line (which is 1400 points away) for the bull market to resume.

For that to happen, FIIs need to become buyers of equity. They may not do so before Jan ‘16.

Daily technical indicators are beginning to turn bullish. MACD has just crossed above its signal line in negative territory. ROC has entered positive zone above its 10 day MA (which has formed a ‘rounding bottom’ pattern). RSI and Slow stochastic are moving up towards their respective 50% levels.

This is as good an opportunity as any to add fundamentally strong stocks to your portfolio.

NSE Nifty 50 index chart

Nifty_Nov2715_LT

The weekly bar chart pattern of Nifty had formed a ‘reversal bar’ (lower low, higher close) with strong volume support in the previous week. That was the first sign of an end of the three weeks long intermediate down trend from the Oct ‘15 top.

By closing higher for the 2nd week in a row – thereby confirming the higher bottom of the previous week – the index may be finally shaking off the 9 months long bear grasp on the chart.

Bears have not been vanquished yet. The index is trading below its 20 week and 50 week EMAs, and the blue down trend line. It needs to convincingly cross above all three for the bull market to embark on the next leg of its rally.

Weekly technical indicators are in bearish zones. MACD and Slow stochastic have stopped falling and are moving sideways. ROC has dropped back into negative zone, and showing some downward momentum. RSI bounced up from the edge of its oversold zone, and is rising towards its 50% level.

Bottomline? Chart patterns of Sensex and Nifty appear to have reversed intermediate down trends. Long-term bull markets are intact because both indices are trading well above their respective 200 week EMAs. This is a good time to pick up good stocks. If you are unsure about your stock picking skills, invest in a balanced fund.

Thursday, November 26, 2015

Indian economy poised to take off – a guest post

The stock market has been in a down trend for almost 9 months. FIIs have turned sellers. Already some experts are predicting a long bear market.

The economy seems to be in doldrums. Corporate revenues and profits are sliding. Investments are yet to pick up.

Amidst the doom and gloom, Nishit has identified several signs of an economic revival. He enumerates them in this month’s guest post.

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The Indian economy is showing signs of ‘green shoots’ and we are in the take off stage right now. Let us see the leading indicators to see if we are about to see good growth:

  1. Fuel consumption has increased which is always a sign of pick up in industrial activity. Goods transport has increased.
  2. The Automobile industry is showing signs of revival. When people have money to spend, they buy cars.
  3. The Capital Goods space is showing good traction at the moment. Capital goods space always does well when industrial activity increases.
  4. The IT industry is showing good results. It has been the sector employing maximum people in last 15 years. Affluence of the new IT middle class will lead to increase in consumption.
  5. Low fuel prices mean that a major inflationary pressure is off. I see at least 100 basis points (1%) cut in interest rate over the next one year.
  6. Low Interest regime is conducive to growth. Borrowings increase, industrial activity increases. It is a self-feeding economic cycle. The interest cycle has yet to bottom. The bottom of the rate cut cycle often coincides with a bull run taking place. In March 2009, the rates bottomed and the markets picked up.
  7. The building blocks are in place for a super bull run for the next 5-8 years. This correction is the last buying. opportunity. I see a scenario similar to the one in 2002-2003. The rest is history.
  8. History often is a roadmap for the future. With good governance, favourable economic conditions globally and conducive domestic growth factors, this is a Black Swan event.
  9. Tax collection has increased. This means there is uniform tax collection. I would say increase the Service Tax t o 16% so all bear the burden and reduce Income Tax slabs, do away with exemptions, simplify the tax structure.

We all know what happens when a Black Swan event happens. Nifty may go down to 6800 to 7200, but eventually we are headed to 10500 minimum on the Nifty and over the next 10 years we may even touch 18000 to 20000 - which will be the end of the super cycle as per Elliot wave analysis. Nations take birth, grow, mature and fail. This is true for everything in life, the time span differs. India’s time is now. The next 10 years will be India’s golden age and the party is just about to begin.

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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, November 24, 2015

WTI and Brent Crude Oil charts: an update

WTI Crude chart

WTI Crude_Nov2315

The daily bar chart pattern of WTI Crude oil dropped to a low of 40 on Nov 16, but formed a ‘reversal day’ pattern (lower low, higher close) and bounced up a bit.

However, oil’s price failed to overcome resistance from its falling 20 day EMA, and closed below all three EMAs in a bear market.

Daily technical indicators are in bearish zones, but showing faint signs of upward momentum. Strong volumes on two recent up-days is another bullish sign.

Another attempt at a rally may be in progress – thanks to the continued turmoil in the Middle East. A glut in global supply is likely to play spoil sport.

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

Brent Crude chart

Brent Crude_Nov2315

The daily bar chart pattern of Brent Crude oil touched a low of 43 on Nov 16, but formed a ‘reversal day’ pattern (lower low, higher close) and managed to bounced up a little.

More up-days than down-days last week, accompanied by strong volumes is an indication of bottom fishing.

Oil’s price is yet to cross above its falling 20 day EMA, and is trading below its three EMAs in a bear market. Any rally may be short-lived.

Daily technical indicators are in bearish zones, but showing signs of upward momentum.

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

Sunday, November 22, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 20, 2015

S&P 500 Index Chart

S&P 500_Nov2015

The daily bar chart pattern of S&P 500 shows a spirited fight back by bulls, just when it seemed that bears were getting the upper hand.

The index is trading above all three EMAs in bull territory. The ‘golden cross’ of the 50 day EMA above the 200 day EMA has technically confirmed the end of the bear phase.

Bears are not yet ready to go into hibernation. Volumes on Tue. Nov 17 – a down day – were the highest during the week. It won’t be a surprise if bears try to sell the rally again.

All three technical indicators are in bullish zones. Upward momentum on MACD and RSI looks weak. Slow stochastic is showing strong upward momentum.

On longer term weekly chart (not shown), bulls battled hard to push the bears back. The index jumped up to close well above its three weekly EMAs in a long-term bull market. Weekly technical indicators are looking bullish.

FTSE 100 Index Chart

FTSE_Nov2015

After briefly slipping below the 6100 level, the daily bar chart pattern of FTSE 100 rallied above its 20 day and 50 day EMAs and gained 3.5% on a weekly closing basis.

However, the 200 day EMA is still sliding down, and the index is trading below it in a bear market. The possibility of another bear onslaught can’t be ruled out.

Daily technical indicators are showing some upward momentum. RSI and Slow stochastic have crossed above their respective 50% levels. MACD is trying to emerge from its negative zone.

On longer term weekly chart (not shown), the index pulled back towards its 200 week EMA, but failed to cross above it. The 20 week EMA is about to cross below the 200 week EMA. The ‘death cross’ of the 50 week EMA below the 200 week EMA will technically confirm of a long-term bear market. Weekly MACD and RSI are still in bearish zones. Slow stochastic bounced up after receiving support from its 50% level.

Saturday, November 21, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 20, 2015

After the debacle in the Bihar state elections, the government has become more proactive about reform measures. A second round of sops was announced for exporters in a bid to shore up sagging exports.

FIIs remained bears during the week. Their net sales in equities exceeded Rs 2700 Crores, as per provisional figures. DIIs were bulls. Their net buying in equities crossed Rs 3000 Crores.

Both Sensex and Nifty closed around 1% higher for the week, after three straight weeks of losses.

After three years of disappointment, emerging markets (including India) are expected to turn the corner in 2016 – as per Goldman Sachs.

BSE Sensex index chart

Sensex_Nov2015

The daily closing chart pattern of Sensex remains in a 9 months long down trend, and continues to trade below its three EMAs in bear territory.

However, bulls appear to be defending the extended ‘neckline’ (NL) of the ‘inverse head and shoulders’ pattern well.

Daily technical indicators are in bearish zones, but are in the process of correcting oversold conditions.

Bears will continue to dominate as long as the blue down trend line is not breached, and FIIs remain sellers.

Market action has shifted towards mid-cap and small-cap stocks – several of which touched 52 week highs last week. Investor’s should be aware of the ‘greater fool theory’ before jumping in.

NSE Nifty 50 index chart

Nifty_Nov2015

The weekly bar chart pattern of Nifty is trading below its 20 week and 50 week EMAs, but is more than 800 points above its still rising 200 week EMA.

That means the long-term bull market is intact, but the medium-term bearishness remains. What does that imply for small investors?

Those with a long-term view should use the correction as a buying opportunity. Those with a shorter-term view can make the down trend their friend.

Note that the previous bull phase – from the low of Aug ‘13 to the top of Mar ‘15 consumed 19 months. The correction from the Mar ‘15 top has lasted 9.5 months – a 50% time-wise correction.

Expecting the index to fall much lower and for much longer may be counter-productive. Why? Because the long-term bull market is very much alive.

Weekly technical indicators are in bearish zones, but showing some signs of turning around.

Bottomline? Chart patterns of Sensex and Nifty are trying to reverse intermediate down trends. Long-term bull markets are intact because both indices are trading above their respective 200 week EMAs. Time for stock picking is now. If you are unsure about your stock picking skills, enter a good balanced fund.

Related Post

Why the current state of the stock market makes me happy and sad

Wednesday, November 18, 2015

Nifty chart: a midweek update (Nov 18 ‘15)

The WPI inflation number for Oct ‘15 came in at –3.81% – its 12th straight month of degrowth. In Oct ‘14, the WPI number was 1.66%. RBI’s focus has shifted to CPI inflation, which has began to rise again.

Exports continued its downward trend for the 11th month in a row, falling by 17.53% to $21.35 Billion in Oct ‘15. Imports were also lower by 21.15% to $31.12 Billion – resulting in a decline in the trade deficit to $9.77 Billion.

FIIs were net sellers of equity worth Rs 2300 Crores during the first three days of the week, as per provisional figures. DIIs were net buyers of equity worth Rs 2200 Crores.

Despite the down trend in the stock market, domestic investors are keeping faith in equities – as evidenced by the swelling AUMs of fund houses.

Nifty_Nov1815

The daily bar chart pattern of Nifty is in the midst of an intermediate down trend within a larger down trend that started in Mar ‘15.

The large downward ‘gap’ formed on Aug 24 ‘15 got completely filled by the rally from the Sep ‘15 low – following which the down move resumed.

Note that the ‘inverse head and shoulders’ pattern that formed just below the ‘gap’ was negated once the index dropped below the ‘neckline’ of the pattern (which coincided with the lower edge of the ‘gap’).

What next? Lower levels on the index. How low? At least a test of the Sep ‘15 low of 7540. Can the index fall even lower?

Nothing can be ruled out when FIIs are selling as if there is no tomorrow. However, all four daily technical indicators are looking oversold.

A technical bounce can happen at any time. But it may not be a strong one.

Tuesday, November 17, 2015

Gold and Silver charts: an update

Gold chart pattern

Gold_Nov1615

The daily bar chart pattern of gold shows a sharp, high-volume drop below the 1100 level, which had acted as a support two months back.

Gold’s price dropped further to test its Jul ‘15 low of 1074, before bouncing up to close above the Jul-Aug ‘15 support level of 1080.

All three EMAs are falling, and gold’s price is trading well below them in a bear market.

Technical indicators are inside their respective oversold zones. If a technical bounce occurs, the zone between 1100 and 1110 is likely to act as a resistance.

Bears have total control over the chart. That means lower levels are a distinct possibility.

On longer term weekly chart (not shown), gold’s price is trading well below its three weekly EMAs in a long-term bear market. MACD has crossed below its signal line in negative zone. RSI is below its 50% level. Slow stochastic has entered its oversold zone.

Silver chart pattern

Silver_Nov1615

The daily bar chart pattern of silver shows a crash below the three EMAs back into bear territory.

Silver’s price is trying to cling on to its Sep ‘15 low of 14.25 – but not for much longer. A test and breach of the 14 level seems imminent.

Daily technical indicators are inside their respective oversold zones. That may not necessarily lead to a technical bounce anytime soon.

On longer term weekly chart (not shown), silver’s price is trading well below its three weekly EMA in a long-term bear market. MACD has crossed below its signal line in negative zone. RSI is falling below its 50% level. Slow stochastic has dropped to the edge of its oversold zone.

Sunday, November 15, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 13, 2015

S&P 500 Index Chart

S&P 500_Nov1315

The following comments appeared in the previous post on the daily bar chart pattern of S&P 500:

“Strong volumes on the three down-days of the week show that bears are not going to throw in the towel without a fight. A bit of correction will improve the technical ‘health’ of the chart and allow the index to rise to a new high.” 

The index corrected down to its 20 day EMA on Mon. Nov 9, received good support and bounced up a bit. Bears attacked with renewed vigour and pushed the index below all three EMAs into bear territory by the end of the week.

Note that the 50 day EMA failed to cross above the 200 day EMA and has merged with it. The ‘golden cross’ that technically confirms a bull market was prevented.

The index lost 3.6% on a weekly closing basis. Rising volumes on the last two days of the week indicate that bears are ready to dominate once again.

Technical indicators are looking bearish and showing strong downward momentum. MACD has crossed below its signal line in positive zone. The signal line and 20 day EMA have formed ‘rounding top’ reversal patterns. RSI has dropped below its 50% level. Slow stochastic has entered its oversold zone.

On longer term weekly chart (not shown), the index touched a lower top of 2116 a week ago, and dropped sharply below its 20 week and 50 week EMAs. However, it is trading well above its rising 200 week EMA in a long-term bull market. Weekly technical indicators are beginning to turn bearish.

FTSE 100 Index Chart

FTSE_Nov1315

The sideways consolidation below its sliding 200 day EMA failed to generate any upward momentum for the daily bar chart pattern of FTSE 100.

After slipping down into bear territory below its three EMAs on Mon. Nov 9, the index tried to cling on to the 6300 level for a couple of days. Bears decided enough was enough.

Heavy selling dropped the index down to the 6100 level. On a weekly closing basis, the index lost 3.7%.

Technical indicators are in bearish zones and showing downward momentum. MACD has dropped inside negative zone. RSI is falling towards its oversold zone. Slow stochastic is well inside its oversold zone.

Note that the MACD signal line and 20 day EMA have formed ‘rounding top’ reversal patterns. Some more correction is likely.

On longer term weekly chart (not shown), the index closed well below its three weekly EMAs, and is probably entering a long-term bear market. The ‘death cross’ of the 50 week EMA below the 200 week EMA will provide the technical confirmation. Weekly MACD and RSI are in bearish zones. Slow stochastic is about to drop below its 50% level.

Saturday, November 14, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 13, 2015

The festival of lights failed to bring much joy to stock market bulls. During the holiday-shortened week, FIIs were net sellers of equity worth almost Rs 2300 Crores, as per provisional figures. Net buying by DIIs – worth Rs 1350 Crores – could not prevent the market indices from sliding down further.

Macroeconomic picture is not helping bulls. CPI inflation for Oct ‘15 rose to 5% - compared with 4.41% in Sep ‘15 and 4.62% in Oct ‘14. The IIP number dropped to 3.6% in Sep ‘15 – higher than 2.6% in Sep ‘14 but much lower than the revised figure of  6.2% in Aug ‘15.

Q2 (Sep ‘15) results have not shown much improvement over Q1 (Jun ‘15) results. Revenue growth has been meagre. Profits have grown mainly because of lower commodity prices. Capital expenditure has stalled. Exports and imports are still falling – indicating lower overseas demand and shrinking domestic industrial activity.

It is not all doom and gloom. Governments coffers are getting full due to rising indirect tax collections. Increased government spending will lead to a turnaround in the overall investment sentiment. Growth in sales of medium and heavy commercial vehicles is a sign of an improving economy.

BSE Sensex index chart

Sensex_Nov1315

The daily closing chart pattern of Sensex has been in an intermediate down trend for the past three weeks after breaking out upwards from an ‘inverse head and shoulders’ pattern.

By slipping below the extended neckline (marked NL) and the ‘right shoulder (marked RS), the ‘inverse head and shoulders’ pattern has been negated. That means lower index levels – and a likely test of the Sep ‘15 low (of 24833 – marked ‘Head’).

There is a possibility of bulls fighting back for two reasons:

  1. The downward breach of NL has not been a convincing one yet.
  2. All four daily technical indicators are looking oversold.

Any upward bounce may be a weak one, as both RSI and Slow stochastic are still displaying negative divergences (marked by blue arrows) by touching lower bottoms while Sensex touched a higher bottom.

Your asset allocation plan should be your guide now. If it indicates buying equity, don’t wait for lower levels because it is almost impossible to catch a bottom. Start slowly accumulating fundamentally strong stocks. This bull market correction is on its last legs.

NSE Nifty 50 index chart

Nifty_Nov1315

The weekly bar chart pattern of Nifty has entered the 9th month of a corrective move after touching a lifetime high of 9119 in Mar ‘15. The 20 week EMA has crossed below the 50 week EMA for the first time in more than 2 years.

Though the index is at the same level of Oct ‘14, it is trading almost 750 points above its 200 week EMA – indicating that the long term bull market is intact.

Weekly technical indicators are looking bearish. MACD has crossed below its signal line in negative zone. RSI and Slow stochastic are falling below their respective 50% levels.

Some more correction, and a test of the Sep ‘15 low of 7540 is likely. The dip can be used to add fundamentally strong stocks to your portfolio.

Bottomline? Chart patterns of Sensex and Nifty are in intermediate down trends and seeking lower levels. Long-term bull markets are still intact since both indices are trading above their respective 200 week EMAs. This may be the last dip before the next leg of the bull market begins.

Friday, November 13, 2015

How to survive and thrive during a bear phase in the stock market

During bull phases, the general direction of the stock market is upwards, but there are frequent corrections and consolidations along the way.

In bear phases, the general direction of the stock market is downwards, but there will be intermittent rallies in between. That is the way a stock market behaves.

Yet, small investors tend to become joyous and euphoric in bull phases – forgetting that a bear phase is around the corner.

They also become despondent and depressed during bear phases – even though duration of a bear phase is often less than that of a bull phase.

The current bear phase is into its 9th month. And, there seems to be no end in sight. BJP’s popularity seems to be waning. Economic growth is sluggish. Corporate earnings are stagnant.

What should small investors do in such a situation?

Stay out of the way of a bear: they are powerful and fearless animals, and will maul you if you try to fight back. The sensible strategy would be to climb a tree to safety. In investment terms, put your money in fixed income instruments or liquid funds, or ‘defensive’ sectors (like FMCG, Pharma) – so that you can earn some returns.

Continue with your fund SIPs: the best way to build wealth from the market is to stay invested for the long term. Bear phases allow you to buy more units of the fund. Allow the fund manager to churn the fund portfolio – it is in his vested interest to do so for best results.

Control your emotions: decision making – specially under uncertain conditions – has to be fact-based and dispassionate. This applies particularly for investments, where your hard-earned money is at stake. If a stock you hold is losing ground fast, don’t try to ‘average down’ because you don’t know how low it can go. Wait for the stock price to turn around. Then ‘average up’.

Follow an asset allocation plan: distribute your investments among equities, debt instruments, gold and cash. The plan will take the guess work out of your investment decisions. Only equities get affected by bear phases. When your equity allocation falls below the threshold you have set in the plan, use the cash to rebalance your assets.

Related Posts

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How to reallocate your assets

About asset allocation

Tuesday, November 10, 2015

WTI and Brent Crude Oil charts: bears selling at every rise

WTI Crude chart

WTI Crude_Nov0915

Another attempt at a rally by the daily bar chart pattern of WTI Crude oil came to naught. After briefly crossing above its 20 day and 50 day EMAs, oil’s price touched a lower top and succumbed to selling pressure.

Down days have outnumbered up days during the past 6 months – showing strong bear domination. The 200 day EMA continues to fall, and oil’s price is trading well below it in a bear market.

Daily technical indicators are in bearish zones, and showing downward momentum. MACD is falling below its signal line in negative zone. RSI and Slow stochastic have crossed below their respective 50% levels.

The Aug ‘15 low of 38 may get tested and breached.

On longer term weekly chart (not shown), oil’s price faced resistance from its falling 20 week EMA, and is trading below its three weekly EMAs in a long-term bear market. Weekly MACD and RSI are moving sideways in bearish zones. Slow stochastic has managed to stay above its 50% level.

Brent Crude chart

BrentCrude_Nov0915

The daily bar chart pattern of Brent Crude oil made another attempt to extricate itself from a strong bear grip, but failed. A brief rally above its 20 day and 50 day EMAs stopped short at the 51 level.

Bears used the rally to sell – as they did a month back. Oil’s price continues to trade well below its falling 200 day EMA in a bear market.

Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in negative zone. RSI and Slow stochastic have dropped below their respective 50% levels.

The low of 42 – touched in Aug ‘15 – may get tested.

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 are moving sideways in bearish zones.

(Wishing all blog visitors and subscribers a happy Diwali and a prosperous New Year.)

Sunday, November 8, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Nov 06, 2015

S&P 500 Index Chart

S&P 500_Nov0615

The daily bar chart pattern of S&P 500 continued its rally and crossed above the 2100 level easily, but stopped short of the 2120 level. It closed the week just below the 2100 level with a 1% weekly gain.

All three EMAs are rising and the index is trading above them. The ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

Technical indicators are in bullish zones, and in the process of correcting overbought conditions. MACD and Slow stochastic are ready to drop from their overbought zones. RSI faced resistance from its overbought zone and is trading sideways.

Strong volumes on the three down-days of the week show that bears are not going to throw in the towel without a fight. A bit of correction will improve the technical ‘health’ of the chart and allow the index to rise to a new high.

On longer term weekly chart (not shown), the index closed higher for the 6th week in a row, and is trading 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_Nov0615

The daily bar chart pattern of FTSE 100 continued its sideways consolidation with a slight upward bias, though it closed marginally lower for the week. The gently rising 50 day EMA provided good downside support.

Technical indicators are giving mixed signals, which is often the case during sideways consolidations. MACD has crossed below its signal line and slipped down from its overbought zone. RSI is sliding down towards its 50% level. Slow stochastic has dropped below its 50% level.

The index is technically in a bear market because it is trading below its gradually descending 200 day EMA. Some more consolidation can be expected.

On longer term weekly chart (not shown), the index again closed below its three weekly EMAs, and is in danger of falling back into a long-term bear market. Weekly MACD and RSI are in bearish zones, but Slow stochastic has managed to stay above its 50% level.

Saturday, November 7, 2015

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 06, 2015

After 2 months of heavy selling, FIIs turned net buyers of equity worth Rs 3000 Crores during Oct ‘15. DIIs were net sellers of equity worth Rs 1500 Crores, as per provisional figures.

In the first trading week of Nov ‘15, FIIs were net sellers of equity worth about Rs 1500 Crores. DIIs were net buyers worth Rs 1000 Crores. Both Sensex and Nifty have dropped near important support levels.

Will the supports hold, or will both indices seek lower levels? The result of Bihar state elections may provide the immediate trigger. The market seems to have discounted a defeat for the NDA.

Q2 (Sep ‘15) results continue to disappoint. Tata Steel, SAIL, Tata Motors, M&M showed top line and bottom line pressure. A big recovery is unlikely in Q3 (Dec ‘15). A performance turnaround should be visible from Q4 (Mar ‘16) onwards – as a lower base effect will come into play.

BSE Sensex index chart

Sensex_Nov0615 

The daily bar chart pattern of Sensex faced strong resistance from the blue down trend line, and has dropped below its three EMAs into bear territory.

The index has slipped below the 26400 level, which had provided support during Dec ‘14, May ‘15 and Jun ‘15. It is seeking support from the neckline (marked NL) of the ‘inverse head and shoulders’ pattern.

If the index falls below NL, it can drop to test the Sep ‘15 low of 24833 (marked Head). Bulls can be expected to put up a fight to prevent that.

Daily technical indicators are bearish and looking oversold. MACD is falling below its signal line and has entered negative zone. ROC, RSI and Slow stochastic have entered their respective oversold zones.

An upward bounce can occur at any time. Will that be a buying opportunity? Volumes accompanying the likely bounce will decide the answer: strong volumes – Yes; weak volumes – No.

Note that RSI and Slow stochastic are showing negative divergences by dropping to their Sep ‘15 lows, and hinting at a continuation of the correction.

NSE Nifty 50 index chart

Nifty_Nov0615

The weekly bar chart pattern of Nifty faced twin resistances from the blue down trend line and the ‘support-resistance level’ of 8335. The index is trading below its two weekly EMAs in bear territory.

The 7950 level, which had acted as a support during Dec ‘14, May ‘15 and Jun ‘15 has just about managed to prevent the index from falling further. But the relief may be temporary for bulls.

Only an unexpected victory by NDA in the Bihar elections can change the current market mood of despondence. The exit polls do not suggest such a possibility.

Weekly technical indicators are in bearish zones. MACD remains merged with its signal line in negative zone. ROC is looking a little bullish by rising above its 10 week MA, but is still inside negative zone. RSI is sliding down towards its oversold zone. Slow stochastic is about to fall below its 50% level.

Bottomline? Chart patterns of Sensex and Nifty faced strong resistances from their respective down trend lines, and are near crucial support levels. Long-term bull markets are still intact since both indices are trading well above their respective rising 200 week EMAs (not shown). Remain cautious, but keep a ‘buy list’ ready.

Friday, November 6, 2015

8 Signs of a Doomed Stock

One of the mistakes many small investors make is buying unknown small-cap stocks based on tips via SMS or advice from friends of friends who have ‘inside information’.

When they realise that a stock is a lemon and rapidly losing ground, they compound their original mistake by buying more in an effort to ‘average’ down the original cost.

Eventually the stock becomes unsaleable because there are no buyers left, or the stock gets delisted.

There are two ways to avoid such mistakes. The safer way is to buy only well-known large-cap stocks (though there are no guarantees that such stocks won’t go down after buying them).

The smarter way is to do a proper fundamental and technical analysis of the company before you buy its stock.

In a recent article in investopedia.com, 8 signs of a doomed stock have been listed. The list can be used as a guideline for the kind of stocks you should avoid buying.

You can read the article at this link.

Wednesday, November 4, 2015

Nifty chart: a mid-week update (Nov 04 ‘15)

Q2 (Sep ‘15) results declared so far have seen more misses than hits. Top line growth of Indian companies have been disappointing. Lower commodity prices and belt tightening has led to some bottom line growth.

Market sentiments and Nifty levels are reflecting the disappointment. As per provisional figures, FIIs were net sellers of equity worth Rs 690 Crores during the first three trading days in Nov ‘15. DIIs were net buyers of equity worth Rs 420 Crores.

4-wheeler and 2-wheeler sales picked up considerably in Oct ‘15 despite a higher base (both Dussehra and Diwali were celebrated in Oct ‘14). That gives hope of good auto sales in Nov ‘15. Lower interest rates played a part in boosting sales.

Nifty_Nov0415

The daily closing chart pattern of Nifty appears to have lost its way after breaking out above the neckline (marked NL) of an ‘inverse head and shoulders’ reversal pattern.

The index rallied above its three EMAs and briefly entered bull territory, but failed to overcome twin resistances from the 8335 level (marked by dotted horizontal line) and the blue down trend line that has dominated Nifty’s chart for the past 8 months.

The index has fallen below its three EMAs, and may fall further. The neckline (NL) can provide some support to the index. Will the support be strong enough to withstand the bearish sentiment?

Results – or, the exit polls – of the Bihar election will provide the answer.

Daily technical indicators are looking bearish. MACD is falling below its signal line, and looks ready to enter negative zone. ROC is negative and falling below its 10 day MA. RSI has dropped below its 50% level. Slow stochastic has dropped inside its overbought zone.

Note that RSI and Slow stochastic are showing positive divergence by moving up slightly.

Keep your ‘buy list’ ready in case the NDA can pull off a victory in the Bihar elections. That can set-off a brief pre-Diwali rally.

Tuesday, November 3, 2015

Gold and Silver charts: bear domination resumes

Gold chart pattern

Gold_Nov0215

The daily bar chart pattern of gold had broken out and closed above its 200 day EMA on Wed. Oct 14, but the foray into bull territory did not last long.

Overbought technical indicators had indicated the possibility of a correction below the 200 day EMA. After finding brief support from its 20 day EMA, gold’s price crashed swiftly below all three EMAs.

US Fed’s hawkish stance about an interest rate hike put paid to bullish hopes.

Daily technical indicators are looking bearish and showing strong downward momentum. MACD is falling rapidly towards its negative zone. RSI has dropped below its 50% level. Slow stochastic has dived inside its oversold zone.

Note the bearish ‘rounding top’ patterns formed by the 20 day EMA and the MACD signal line. Any attempt at a rally is likely to be short-lived.

On longer term weekly chart (not shown), gold’s price faced strong resistance from its 50 week EMA, and closed well below its three weekly EMAs in a long-term bear market. MACD is moving sideways in negative zone. RSI has crossed below its 50% level. Slow stochastic is falling towards its 50% level.

Silver chart pattern

Silver_Nov0215

The daily bar chart pattern of silver hovered around its 200 day EMA for almost the entire month of Oct ‘15 in a desperate effort to return to bull territory.

Silver’s price received good support from its 20 day EMA and rose to touch a 4 months high of 16.40 on Oct 28, but eventually succumbed to selling pressure from bears.

Daily technical indicators are looking bearish and showing downward momentum. MACD crossed below its signal line and is falling in positive zone. RSI has slipped below its 50% level. Slow stochastic has dropped like a rock to enter its oversold zone.

Silver’s price is seeking support from its 50 day EMA, but the support is unlikely to hold. The 2 months long bear market rally is over.

On longer term weekly chart (not shown), silver’s price failed to overcome strong resistance from its 50 week EMA, and is trading below its three weekly EMA in a long-term bear market. MACD is moving sideways in negative zone. RSI has crossed below its 50% level. Slow stochastic has dropped down from its overbought zone.

Sunday, November 1, 2015

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Oct 30, 2015

S&P 500 Index Chart

S&P 500_Oct3015

The daily bar chart pattern of S&P 500 received good support from the 2060 level and seemed poised to cross above the 2100 level. However, the index formed a ‘reversal day’ pattern (higher high, lower close) on Fri. Oct 30 and closed just below the 2080 level.

The 20 day EMA has crossed above the 200 day EMA. The ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

Daily technical indicators are bullish but looking overbought. MACD is rising above its signal line inside its overbought zone. RSI faced resistance from the edge of its overbought zone and slipped down a bit. Slow stochastic is moving sideways inside its overbought zone.

Bears may try to fight back as the index approaches its lifetime high of 2135 (touched in May ‘15). Some consolidation or correction can be expected.

On longer term weekly chart (not shown), the index closed higher for the 5th week in a row, and is trading 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_Oct3015

The daily bar chart pattern of FTSE 100 is still trying to break free from a strong bear grip. After quickly crossing above its 20 day and 50 day EMAs at the beginning of the month, the index consolidated sideways with an upward bias for the rest of the month.

The 20 day EMA has moved above the 50 day EMA after staying below it since the beginning of Jun ‘15, but the index is still trading below its 200 day EMA in bear territory.

Technical indicators are in bullish zones, but showing downward momentum. MACD is about to cross below its signal line and drop from its overbought zone. RSI and Slow stochastic are sliding down towards their respective 50% levels.

Bears will continue to dominate as long as the index stays below the 200 day EMA. The possibility of the index dropping below its 20 day and 50 day EMAs once again can’t be ruled out.

On longer term weekly chart (not shown), the index closed below its three weekly EMAs, and is in danger of falling back into a long-term bear market. Weekly MACD and RSI are in bearish zones, but Slow stochastic has stayed above its 50% level.