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Wednesday, July 26, 2017

Nifty chart: a midweek technical update (Jul 26 ‘17)

FIIs were in profit-booking mood during the first three days of trading this week. Their net selling in equities was worth Rs 1.6 Billion.

DIIs turned bulls. Their net buying in equities was worth Rs 11.4 Billion, as per provisional figures. Nifty closed above the psychological level of 10000 for the first time ever.

Foreign Direct Investment (FDI) inflows increased 23% to $10.02 Billion during Apr-May '17 against $8.12 Billion during Apr-May '16 - thanks to a more investor-friendly policy.


On Mon. Jul 24, the daily bar chart pattern of Nifty broke out above the 150 points (9780-9930) range within which it was consolidating after breaking out above an 'ascending triangle' pattern on Jul 10.

On Tue. Jul 25, the index breached the 10000 level intra-day but could not sustain above the psychological level. Strong buying by DIIs ensured a close above the 10000 level today.

All three EMAs are rising, and the index is trading above them in a bull market. However, daily technical indicators are looking overbought, and two of them - RSI, Slow stochastic - are showing negative divergences by touching lower tops.

The index is more than 900 points above its 200 day EMA. Nifty's TTM P/E is at 25.57 - considerably higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen deep inside its overbought zone.

These technically overbought signals can lead to a corrective move. Whether it will be a correction or some more consolidation will depend on the stance that FIIs take.

Thursday's F&O expiry may induce some more profit booking by FIIs. Stay invested. Keep a 'buy list' ready. If and when you find compelling value, accumulate slowly. 

Tuesday, July 25, 2017

WTI and Brent Crude Oil charts: bears still on top, but bulls trying to fight back

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil shows a spirited fightback by bulls just when bear domination appeared complete.

Oil's price formed a 'reversal day' bar (slightly lower low, slightly higher close) on Jul 10, which triggered a second leg of the rally from its Jun 21 low of 42. 

Note that the second leg of the rally (from the Jul 10 higher bottom) has been supported by stronger volumes, which is a bullish sign.

Oil's price rose above its 20 day and 50 day EMAs to touch an intra-day high of 47.55 on Jul 20 - falling short of its sliding 200 day EMA. 

Profit booking led to the formation of a 'reversal day' bar (higher high, lower close) and a correction below 20 day and 50 day EMAs on Jul 21. A pullback on Jul 24 is facing resistance from the 50 day EMA.

Daily technical indicators are in bullish zones, but not showing any upward momentum. Slow stochastic has dropped like a stone from its overbought zone. Any attempt by bulls to take oil's price above its 200 day EMA is likely to invite bear selling.

On longer term weekly chart (not shown), oil's price faced resistance from its falling 20 week EMA and closed below its three sliding weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones, but Slow stochastic is showing upward momentum.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil seemed to move in lock-step with WTI Crude oil's chart. It touched a higher bottom on Jul 10 and started a second leg of the rally from its Jun 21 low of 44.35.

After touching an intra-day high of 50.20 on Jul 20 and failing to test resistance from its 200 day EMA, oil's price formed a 'reversal day' bar (higher high, lower close).

That triggered a correction below its 20 day and 50 day EMAs on Jul 21. On Jul 24, oil's price bounced up above its 20 day EMA.

Daily technical indicators are not looking bullish. MACD and RSI are at their neutral zones and not showing much upward momentum. Slow stochastic touched a lower top inside its overbought zone - forming a 'double top' reversal pattern, and fell sharply towards its 50% level.

Bears are selling at every rise, keeping oil's price below 50 for almost two months.

On longer term weekly chart (not shown), oil's price faced resistance from its falling 20 week EMA and closed below its three sliding weekly EMAs for the 8th week in a row. Weekly technical indicators are in bearish zones. MACD and RSI are moving sideways, but Slow stochastic is showing upward momentum.

Monday, July 24, 2017

S&P 500 and FTSE 100 charts (Jul 21 '17): bulls assert themselves, but bears refusing to give up

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 pulled back briefly towards the down trend line (refer last week's post) on Tue. Jul 18, but bounced up after receiving good support from the 7450 level.

The index rose to touch a new high of 2478 on Thu. Jul 20 but closed slightly lower to form a small 'reversal day' bar that triggered some profit booking.

On a weekly closing basis, the index gained about 0.5%. Daily technical indicators are looking overbought. MACD and RSI touched lower tops while the index rose higher. The negative divergences can lead to another test of support from the 7450 level.

Note that the two down-days (Thu. & Fri.) is showing the highest volumes during the trading week. Probably an indication that 'smart money' is moving out.  

Can a deeper correction occur? A 10-15% correction for the index is overdue, and will be technically 'healthy' for the long-term bull market. But hoping for a correction doesn't mean one will occur. Just as hoping for the US President to deliver on his election promises has proved futile so far.

On longer term weekly chart (not shown), the index closed at a new high - well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


Note the following comment from last week's post on the daily bar chart pattern of FTSE 100: "The 'support-resistance' level of 7385 has become a clear battle line between bulls and bears."

The index dropped below the support level of 7385 intra-day on Mon. & Tue. (Jul 17 & 18), but bounced up to close above 7385 on both days.

That was a trigger for bulls to make an attempt to breach the (purple) down trend line - below which the index has been trading for the past 7 weeks.

On Fri. Jul 21, the index did breach the 7500 level and the down trend line intra-day, but failed to sustain above the trend line and closed just above the 7450 level with a 1% gain on a weekly closing basis. 

The formation of a 'reversal day' bar (higher high, lower close) on Fri. may lead to some consolidation or correction before the index can convincingly move above the down trend line.

The index is trading above its three EMAs in a bull market. Daily technical indicators are in bullish zones, but not showing much upward momentum. 

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

Sunday, July 23, 2017

Sensex, Nifty charts (Jul 21, 2017): consolidating after breakouts from ascending triangle patterns

FIIs increased their buying in equity shares during the week. Their total net buying was worth Rs 18.6 Billion. DIIs turned net sellers of equity - worth Rs 12.9 Billion - as per provisional figures.

Sensex closed nearly flat - gaining just 8 points for the week. Nifty gained 29 points (0.3%) on a weekly closing basis. Both indices pulled back towards their respective 'ascending triangle' patterns from which they broke out in the previous week.

Reliance pulled a couple of rabbits out of its hat - surprisingly good Q1 (Jun '17) results and a 1:1 bonus announcement that forced bears to cover their shorts.

About 140 FPIs (foreign portfolio investors) registered with SEBI in Apr '17, indicating that India remains an attractive investment destination. The total number of FPIs with SEBI approval increased to 7947

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex consolidated sideways after breaking out above an 'ascending triangle' pattern in the previous week.

The index touched a new high of 32132 on Mon. Jul 17, followed by a sharp pullback towards the top of the 'triangle' the next day. (The possibility of such a pullback was mentioned in last week's post.)

The rising 20 day EMA provided good support to the index, which bounced up to close above the 32000 level for the second week in a row.

Daily technical indicators have corrected overbought conditions but remain close to the edges of their respective overbought zones.

Some more consolidation is likely as the stock market tries to 'digest' Q1 (Jun '17) results. 

All three EMAs are rising, and the index is trading above them in a bull market. Dips can be used to add/enter. Look for opportunities in individual stocks that declare good results.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty pulled back towards the top of the 'ascending triangle' pattern from which it had broken out in the previous week.

Bulls bought the dip. The index recovered to close above the 9900 level for the first time ever, but formed a 'hanging man' candlestick pattern which has bearish implications.

Weekly technical indicators are inside their respective overbought zones. ROC is showing negative divergence by touching a lower top while the index rose higher.

Nifty's TTM P/E is at 25.32 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) is inside its overbought zone.

Expect some consolidation around current levels before the index gathers strength to climb to the psychological level of 10000. The technical upward target - equal to the height of the 'triangle' from the breakout point from the 'ascending triangle' - is about 10075.

Bottomline? Sensex and Nifty charts are consolidating after breaking out above 'ascending triangle' patterns. With FIIs in buying mode, higher index levels are likely despite technically overbought conditions. Stay invested. 

Friday, July 21, 2017

International ETFs that are Trouncing the Competition

"ETFs that appear similar on the surface may perform drastically different. Sometimes, an ETF may outperform its competitors for only a while and then fall back in line (or fall behind). Other ETFs tend to significantly outperform their competitors most of the time."

In a recent investopedia.com article, bullish chart patterns of four of the "hottest non-leveraged international ETFs" (viz. EMQQ, KWEB, PLND, SCIF) were discussed.

Read more here.

Wednesday, July 19, 2017

Nifty chart: a midweek technical update (Jul 19 ‘17)

FIIs were net buyers of equity worth Rs 16.9 Billion during the first three days of trading this week. DIIs were net sellers of equity worth Rs 14.3 Billion, as per provisional figures.

The index closed above the 9900 level for the first time on Mon. Jul 17. But bulls were stopped in their tracks as the GST Council raised the cess on cigarettes.

Nifty lost more than 120 points on Tuesday as bears battered the stock of ITC - which has a large weightage on the index.



The daily bar chart pattern of Nifty has been consolidating sideways within a 150 points range (between 9780 and 9930) after breaking out above a bullish 'ascending triangle' pattern on Mon. Jul 10.

All three EMAs are rising, and the index is trading above them in a bull market. The distance between the index and its 200 day EMA is more than 850 points, which indicates overbought condition as per empirical observations.

Daily technical indicators are also looking overbought. Nifty's TTM P/E is at 25.28 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen deep inside its overbought zone.

With all these technical signals flashing red, what should small investors do? Remember that indices (and stocks) can remain overbought for long periods. That doesn't mean it will be a straight-line rise to new highs.

Leo Puri, MD of UTI Asset Management, said in a recent TV interview: "There is a large space between the two extremes of greed and fear." Learn to become comfortable in that space.

If you have spent the time and effort in creating a good financial plan and an Asset Allocation plan, then there is nothing to worry about. Just stick to the plans regardless of index gyrations.

If you have been buying and selling willy-nilly based on tips or friendly advice, you may be in big trouble already. The best way to get out of trouble is not to 'average' but to get out of losing positions.

Avoid taking large positions on the long or the short side. Remember the story of the hare and the tortoise. Investing is a marathon, not a sprint. You need to have a plan and pace yourself along the way.


(Note: Thinking of adding quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for 2 more days only - till Jul 21, 2017. Contact me at mobugobu@yahoo.com for details.)

Tuesday, July 18, 2017

Gold and Silver charts: pullback rallies facing resistances

Gold chart pattern


The following remarks appeared in the previous post on the daily bar chart pattern of Gold: "The 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market. Bulls may try their best to prevent that."

Gold's price touched an intra-day low of 1204 on Jul 10, but bounced up to close higher - forming a 'reversal day' bar (lower low, higher close). That triggered a pullback rally which is facing resistance from the 20 day EMA.

Note that bulls managed to prevent the 'death cross' of the 50 day EMA below the 200 day EMA. At least for now. May not be for long.

Daily technical indicators have corrected oversold conditions, and are showing upward momentum inside bearish zones. The pullback rally may continue a bit further, but expect resistance from the converging 50 day and 200 day EMAs. 

Gold's price is trading below its 50 day and 200 day EMAs in a bear market. The fact that the price dropped below May 9 'valley' low of 1214 keeps the 'double top' reversal pattern in force (refer previous post), and the possibility of a deeper fall towards the Dec '16 low of 1130.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, and not showing any upward momentum.

Silver chart pattern


The following remarks were made in the previous post on the daily bar chart pattern of Silver: "Expect bears to sell on every rise. A test of the Dec '16 low is a possibility."

Silver's price dropped below its Dec '16 low to touch an intra-day low of 15.145 on Jul 10, but bounced up to close higher - forming a 'reversal day' bar (lower low, higher close). 

The subsequent pullback rally is facing resistance from the May 9 low. Bears can be expected to sell at any time.

Daily technical indicators have corrected oversold conditions and showing some upward momentum. Only Slow stochastic has entered bullish zone (above its 50% level). MACD and RSI are still in bearish zones.

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear marketWeekly technical indicators are in bearish zones and showing a bit of upward momentum.

Monday, July 17, 2017

S&P 500 and FTSE 100 charts (Jul 14 '17): bulls fight back but bears still lurking

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 consolidated below the (purple) down trend line during the first two days of the trading week - receiving good support from its rising 50 day EMA.

On Wed. Jul 12, the index formed a 10 points upward 'gap' and broke out above the down trend line. On Fri. Jul 14, the index rose to touch new intra-day and closing highs.

Note that a breakout with a 'gap' is considered to be more bullish technically. However, there was no significant increase in volumes during the breakout. Also, volumes on Friday decreased while the index touched a new high.

Daily technical indicators are looking bullish and showing upward momentum. MACD has crossed above its signal line in positive zone. RSI is climbing towards its overbought zone. Slow stochastic has entered its overbought zone.

Negative divergences visible on MACD and RSI - which touched lower tops while the index touched a new high - may trigger a pullback towards the down trend line.

The index is trading well above its three EMAs in a bull market.  US Fed's indication that low inflation would lead to a more gradual pace of monetary tightening was a trigger for bullish aggression.

On longer term weekly chart (not shown), the index closed at a new high - well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are inside their respective overbought zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 has spent 6 weeks in a down trend after touching a lifetime high of 7599 on Jun 2.

The index successfully tested support from the 7300 level on Tue. Jul 11 - forming a small 'triple bottom' reversal pattern that triggered a technical bounce above its 20 day and 50 day EMAs on Wed. Jul 12.

Bears used the opportunity to sell. The index dropped below its 20 day and 50 day EMAs, and the 'support-resistance' level of 7385 - but with a 27 points gain on a weekly closing basis.

While the index remains in a down trend, it is trading above its rising 200 day EMA in a bull market. Of the three daily technical indicators, MACD and RSI are in bearish zones; Slow stochastic has crossed above its 50% level into bullish zone.

The 'support-resistance' level of 7385 has become a clear battle line between bulls and bears. (At the time of writing this post, the index is trading above its 20 day and 50 day EMAs and the 7385 level.)

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

Sunday, July 16, 2017

Sensex, Nifty charts (Jul 14, 2017): at new highs after breakout from bullish ascending triangle patterns

FIIs and DIIs were both net buyers of equity during the week - worth Rs 12.6 Billion and Rs 10.4 Billion respectively, as per provisional figures. Sensex and Nifty rose to touch their highest ever levels - each gaining more than 2% on weekly closing basis.

India's WPI inflation eased to 0.9% in Jun '17 - its lowest level in 8 months - against 2.17% in May '17 and -0.1% in Jun '16. Pressure will now mount on RBI to reduce interest rates in its Aug '17 policy meeting.

India's exports grew 4.4% in Jun '17 to $23.56 Billion; imports grew 19% to $36.52 Billion. Trade deficit was lower at $12.96 Billion against $13.84 Billion in May '17, but much higher than deficit of $8.11 Billion in Jun '16. 

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex broke out above the 'ascending triangle' pattern within which it was consolidating since May 24 '17, and rose to touch new intra-day and closing highs above the 32000 level.

The index is trading above its three rising EMAs in a bull market. The breakout from the 'ascending triangle' (the possibility was mentioned in last week's post) has an upward target of about 32670.

Daily technical indicators are looking overbought. Though an index can remain overbought for long periods (check the Jan-Mar '17 period), the possibility of a pullback towards the top of the 'triangle' can't be ruled out.

Recent SEBI strictures on use of P-Notes may have triggered short-covering by FIIs - which may continue during the next couple of weeks.

Initial Q1 (Jun '17) results show no great improvement in earnings by India Inc. It may take another couple of quarters before earnings start to catch up with Sensex valuation.

Stock markets have a tendency to 'discount' good news in advance. So, waiting for a big correction to invest may not be a good idea. A correction usually happens when it is least expected. Maintaining SIPs and looking for pockets of fair valuation can work better. 

NSE Nifty index chart pattern



The following remark was made in last week's post on the weekly bar chart pattern of Nifty: "For the past 7 weeks, the index has been consolidating sideways - forming a possible 'ascending triangle' pattern from which the likely breakout is upwards." 

Note that a 'symmetrical triangle' is often an unreliable pattern because a breakout can occur in either direction. But an 'ascending triangle' is more reliable because a price breakout typically occurs above the pattern. 

Likewise for a 'descending triangle' pattern, where the breakout occurs below the pattern. Being able to identify these 'triangle' patterns can be very useful as the breakouts can be triggers for entering (or exiting).

Weekly technical indicators are inside their respective overbought zones and showing negative divergences by failing to touch new highs with the index. (On the daily chart, Nifty has formed a bearish 'hanging man' candlestick pattern.) A pullback towards the top of the 'triangle' is a possibility.

Nifty's TTM P/E has moved above 25 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped back into its overbought zone - which may limit index upside.

Bottomline? Sensex and Nifty charts rose to touch new lifetime highs on the back of combined buying by FIIs and DIIs. Caution is advised. Stay invested. Check Q1 (Jun '17) results to add good performers to your 'buy list'. 

(Note: There are always opportunities in the stock market if you know where to look. Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment NewsletterA limited number of new subscriptions are being offered till Jul. 21, 2017. Contact me for details: mobugobu@yahoo.com.) 

Friday, July 14, 2017

3 Charts Suggest Bullishness in Turkey, Japan and India

Due to the rising level of volatility in the US markets during the past few weeks, many investors are turning to country-specific ETFs to get better returns.

In a recent article in investopedia.com, bullish chart patterns of iShares MSCI Turkey ETF (TUR), iShares MSCI Japan ETF (EWJ) and PowerShares India Portfolio ETF (PIN) were discussed.

Read more here.

Wednesday, July 12, 2017

Nifty chart: a midweek technical update (Jul 12 ‘17)

In a change of strategy, FIIs turned net buyers of equity on all three days of this trading week. As per provisional figures, their total net buying was worth Rs 6.5 Billion.

DIIs were also net buyers of equity on the first two days of trading this week, which exceeded their net selling today. Their total net buying was worth Rs 9 Billion. The index closed today above the 9800 level for the first time ever.

CPI inflation declined to 1.54% in Jun '17 - its lowest level in 5 years - against 2.1% in May '17, on the back of lower food prices. The IIP number for May '17 slipped to 1.7% against a downwardly revised 2.7% in Apr '17 - raising hopes that RBI may reduce interest rates to give a boost to the shrinking industrial sector.



The following remarks appeared in last week's technical update on the daily bar chart pattern of Nifty: "Nifty may be forming an 'ascending triangle' pattern from which the likely breakout is upwards. Some more consolidation within the 'triangle' is likely before the index can rise to a new high."

Combined FII and DII buying triggered the upward breakout from the 'ascending triangle' pattern on Mon. Jul 10. However, a technical glitch at NSE considerably reduced trading hours that led to much lower trading volumes.

The index touched a lifetime intra-day high of 9830 on Tue. Jul 11 and a lifetime closing high of 9816 today. Note that all three daily technical indicators failed to touch new highs with the index. 

The negative divergences can lead to a pullback to the top of the 'triangle'. It will provide an entry opportunity to those who may have missed buying on the breakout.

The index is trading above its three rising EMAs in a bull market, but it is more than 800 points above its 200 day EMA - which indicates overbought condition as per empirical observations.

Daily technical indicators have entered their respective overbought zones. Nifty's TTM P/E is almost at 25 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone but showing a bit of downward momentum in neutral zone.

With FIIs back in buying mode, the index may move higher despite overbought technical conditions. Stay invested. Check Q1 (Jun '17) results to identify the better performing companies. Use the rally to get rid of non-performers in your portfolios. 

(Note: Looking to add good quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. A limited number of paid subscriptions are being offered till July 21, 2017Contact me for details: mobugobu@yahoo.com.)

Tuesday, July 11, 2017

WTI and Brent Crude Oil charts: bears stay on top

WTI Crude Oil chart


The following comments were made in the previous post on the daily bar chart pattern of WTI Crude Oil: "Oil's price is trading below its three falling EMAs in a bear market. Expect bears to resume selling if bulls try to engineer a rally."

Oversold technical indicators triggered a sharp counter-trend rally that propelled oil's price above its 20 day and 50 day EMAs.

After touching a much lower top of 47.32 on Jul 5, oil's price formed a large 'reversal day' bar (higher high, lower close) with a spurt in volumes that signalled the end of the rally.

All three EMAs have resumed their downward journey. Oil's price is trading below them in a bear market.

Daily technical indicators are turning bearish and hinting at some more correction or consolidation.

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

Brent Crude Oil chart


Oversold technical indicators led to a short-covering rally on the daily bar chart pattern of Brent Crude Oil

A brief foray above the 50 day EMA on Jul 3 was followed by a test of resistance from the 50 level on the following day.

The formation of a large 'reversal day' bar (higher high, lower close) with a volume surge marked an intermediate top and an end of the rally.

Oil's price is trading below its three falling EMAs in a bear market.

Daily technical indicators are looking bearish and hinting at some more correction or consolidation.

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

Monday, July 10, 2017

S&P 500 and FTSE 100 charts (Jul 07 '17): bears still calling the shots

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 has been in a three weeks long down trend (marked by purple down trend line) since touching a lifetime high of 2454 on Jun 19.

In a holiday-shortened trading week, the index touched a lower top of 2439 on Mon. Jul 3 only to slip down and close below its 50 day EMA on Jul 6. It bounced up to close just below its 20 day EMA for the week.

Daily technical indicators are looking bearish. MACD is sliding down below its signal line in bullish zone. RSI is trying to cross above its 50% level after falling below it. Slow stochastic is falling below its 50% level.

MACD and RSI are showing negative divergences by touching lower bottoms while the index touched a slightly higher bottom.

The index is trading well above its rising 200 day EMA in a bull market. However, some more consolidation or correction below the (purple) down trend line can be expected.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are correcting overbought conditions, and showing downward momentum.

FTSE 100 index chart pattern


After touching a lifetime high of 7599 on Jun 2, the daily bar chart pattern of FTSE 100 has been in a down trend (marked by purple down trend line) that has entered its 6th week.

An oversold Slow stochastic triggered a technical bounce on Mon. Jul 3 (the possibility was mentioned in last week's post), but the index faced resistance from the 7385 level.

For the rest of the week, the index consolidated sideways between 7300 and 7385 - closing about 0.5% higher for the week. (At the time of writing this post, the index is testing resistance from the 7385 level.)

All three daily technical indicators are in bearish zones, and showing slight upward momentum. A convincing move above the 7385 level and the falling 20 day and 50 day EMAs is required for bulls to regain control.

The index is trading above its rising 200 day EMA in a bull market. However, a breach of the 7300 level may lead to a deeper correction and a test of support from the 200 day EMA.

On longer term weekly chart (not shown), the index bounced up to close at its 20 week EMA, and above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD and Slow stochastic are showing downward momentum in bullish zones. RSI has bounced up after receiving support from its 50% level.

Sunday, July 9, 2017

Sensex, Nifty charts (Jul 07, 2017): forming bullish ascending triangle patterns?

FIIs were net sellers of equity worth Rs 19.5 Billion during the week. DIIs were net buyers of equity worth Rs 23.6 Billion, as per provisional figures.

Sensex and Nifty gained 1.4% and 1.5% respectively on a weekly closing basis, and are within handshaking distances of their lifetime highs.

Concerns regarding GST implementation are gradually dissipating. Over the medium to long-term, market share is expected to shift away from unorganised players (mainly micro, small and medium enterprises) to organised sectors.  

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex shows the effect of a week of strong buying by DIIs. 

The index bounced up after receiving good support from its 50 day EMA, and rose to touch an intra-day high of 31461 (just 0.2% lower than its Jun 22 top) and a lifetime closing high of 31369 on Thu. Jul 6 

By touching a higher bottom of 30681 on Jun 30, the index may be in the process of forming an 'ascending triangle' pattern, from which the likely breakout is upwards.

Daily technical indicators are in bullish zones, but only Slow stochastic is showing any upward momentum. All four are showing negative divergences (marked by blue arrows).

Some more consolidation within the 'triangle' is possible before the index eventually breaks out.

Remember that an upward breakout will be technically valid if accompanied by a volume surge. Without volume support, the likely breakout may be followed by a pullback towards the top of the 'triangle'.

Stay invested. Await Q1 (Jun '17) results to decide the next course of action.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty rose to test resistance from the 9700 level before closing just 2 points lower than its lifetime closing high of 9668 (in the week ending on Jun 9). 

For the past 7 weeks, the index has been consolidating sideways - forming a possible 'ascending triangle' pattern from which the likely breakout is upwards.

Weekly technical indicators are in bullish zones and looking overbought. Three of them are showing negative divergences (marked by blue arrows) by failing to touch higher bottoms with the index.

Nifty's TTM P/E has moved up to 24.6 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped back inside its overbought zone after briefly emerging from it.

Some more consolidation around current levels is a possibility before the index can break out.

Bottomline? Sensex and Nifty charts are consolidating sideways near lifetime highs. Some more consolidation is likely. Stay invested. Await Q1 (Jun '17) results - to be announced from next week onwards. 

(Note: Don’t worry too much about index fluctuations! Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jul. 21, 2017. Contact me for details: mobugobu@yahoo.com.) 

Friday, July 7, 2017

Technical updates – Colgate and HUL

Why do I like FMCG stocks? Predictability of earnings. Plus the fact that most companies are almost debt free, generate huge cash flows, pay regular dividends and grow steadily whether it is a bull or a bear cycle in the market.

But aren't they expensive? Sure they are. So are BMW cars and Harley Davidson motorcycles. Just as you can (and probably do) buy expensive vehicles using EMIs, you can buy expensive FMCG stocks using SIPs.

Colgate and HUL - two of the better known stocks in the FMCG sector - gave very little capital gains for nearly 18 of the previous 24 months. But they have 'caught fire' during the past 6 months - thanks to demonetisation and GST. 

The balance of power is shifting from the unorganised to the organised sector. The FMCG sector will be one of the biggest gainers of this shift. If you have avoided the sector because it is 'too expensive', it is time for a rethink.

Colgate


Colgate's stock has tested the patience of long-term investors. But long-term investors know the benefit of patience.

After moving sideways in a broad range of about 200 points - giving longer term trading opportunities, the stock has rallied sharply to close at a high of 1128 on Jul 3 '17.

Overbought technical indicators that showed negative divergences by failing to touch new highs with the stock have triggered some profit booking. The dip is providing an entry opportunity.

HUL


HUL's stock moved sideways within a 160 points range - testing the patience of long-term investors. But their patience has been well rewarded. 

The stock rose sharply to close at a high of 1124 on Jun 21 '17. But all four daily technical indicators touched lower tops. The combined negative divergences led to a correction down to its 20 day EMA, which has provided good support.

The stock can correct/consolidate a bit more. 

The best way to accumulate HUL is to spare 10K or 20K from your monthly savings and just go on buying for the next 5 years. (I can assure you that it is better than paying EMIs on a BMW or a Harley - both of which are depreciating assets.)

Wednesday, July 5, 2017

Nifty chart: a midweek technical update (Jul 05 ‘17)

FIIs were net sellers of equity worth Rs 14.1 Billion during the first three days of trading this week, despite being net buyers today.

DIIs were net buyers of equity worth Rs 13.3 Billion, as per provisional figures. Nifty recovered 200 points from last Friday's low of 9449, but is facing a bit of resistance from the 9650 level.

The Nikkei India Manufacturing PMI slipped to 50.9 in June '17, from 51.6 in May '17 and 52.5 in Apr '17. Though a figure above 50 indicates growth, the slide in the PMI number is a matter of concern.


The daily bar chart pattern of Nifty briefly dropped below its 50 day EMA to touch an intra-day low of 9449 on Jun 30, its lowest level in 5 weeks.

The index bounced up to close higher - forming a 'reversal day' bar (lower low, higher close). That allowed bulls to stage a recovery.

Strong buying by DIIs on Mon. Jul 3 propelled the index above its 20 day EMA and the 9600 level. A convincing move above the Jun 6 top of 9709 will put bulls firmly back in the saddle.

Daily technical indicators are looking bullish, and showing some upward momentum. MACD is still below its falling signal line in bullish zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.

Nifty's TTM P/E has moved up to 24.53 - well above its long-term average. The breadth indicator NSE TRIN has corrected extreme overbought condition, but remains at the edge of its overbought zone.

GST implementation will be a game-changer for India's economic growth in the long-term. Initial teething problems and confusion among small traders may keep growth on the slow lane in the interim.

Nifty may be forming an 'ascending triangle' pattern from which the likely breakout is upwards. Some more consolidation within the 'triangle' is likely before the index can rise to a new high. 

A sharp rally is unlikely as long as FIIs remain sellers. Stay invested. Buy only if you find value.

[Not sure which mid-cap and small-cap stocks to pick for long-term returns? Learn by subscribing to my Monthly Investment Newsletter. Paid subscriptions are being offered only for a limited period. Send an email to mobugobu@yahoo.com for details. Subscriptions will remain open till July 21, 2017.]

Tuesday, July 4, 2017

Gold and Silver charts: bears gaining complete control

Gold chart pattern


The following comments appeared in the previous post on the daily bar chart pattern of Gold: "A technical bounce from the 200 day EMA is a possibility. Bears may use the opportunity to sell again."

Gold's price did bounce up after receiving support from its 200 day EMA, but faced strong resistance from its falling 20 day EMA and dropped sharply below all three EMAs to close below 1220 in bear territory.

A 'double top' reversal pattern (marked by T1 and T2), with target implications, has formed on the chart. The distance from the 'valley' to 'T2' (about 85 points) is the same distance gold's price can fall below the 'valley'

A test of the 1130 level - where gold's price made multiple bottoms in Dec '16 - is on the cards. 

The 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market. Bulls may try their best to prevent that.

Daily technical indicators are bearish and looking oversold. Slow stochastic has touched a higher bottom inside its oversold zone. The positive divergence can trigger a pullback towards the 200 day EMA.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish, and showing downward momentum.

Silver chart pattern



The following comment appeared in the previous post on the daily bar chart pattern of Silver: "A test of the May 9 low may be on the cards."

Silver's price rallied within a bearish 'flag' pattern and moved above its falling 20 day EMA to touch a high of 16.86 on Jun 29, but formed a 'reversal day' bar.

That triggered a sharp fall below the 'flag'. Silver's price tested and closed near the May 9 low of 16.06.

Daily technical indicators are looking bearish and showing downward momentum. Slow stochastic has touched a higher bottom, which may cause a pullback towards the 'flag'.

Expect bears to sell on every rise. A test of the Dec '16 low is a possibility.

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear marketWeekly technical indicators are looking bearish and showing downward momentum.