Wednesday, February 8, 2017

Nifty chart: a midweek technical update (Feb 08 ‘17)

Contrary to market expectations, the RBI Governor kept repo and reverse repo rates unchanged at today's policy meeting. However, he has made it clear to banks that there was enough room to further reduce lending rates.

Cash withdrawal limits from savings accounts will be raised to Rs 50,000 per week effective Feb 20. From Mar 13 onwards, withdrawal limits will be removed completely. Nifty recovered intra-day losses to close flat.

FIIs turned net sellers of equity worth Rs 3.3 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 19 Billion, as per provisional figures.


The daily bar chart pattern of Nifty formed an upward 'gap' and scaled the 8800 level on Mon. Feb 6 - gaining more than 900 points from its Dec '16 low. It has since slipped down a little, and filled Monday's upward 'gap'.

Uncertainty about the RBI policy meeting had led to some profit booking. The index appears ready to move up to test its Sep '16 top 8969.

All three EMAs are rising, and the index is trading above them in a bull market. Technical indicators are looking overbought. Some more correction or consolidation is likely.

Nifty's TTM P/E is at 23.28, which is well above its long-term average. The breadth indicator NSE TRIN (not shown) remains deep inside its overbought zone.

Remember that an index can remain overbought for long periods. The strategy to make money in a bull market is to buy the dips - which bulls are clearly following.

Nifty is approaching its lifetime high - touched back in Mar '15. Expect serious profit booking around the psychological level of 9000.

(Note: There will be no blog posts for the next few days. Planning to take a short break from the market to commune with nature at a reserve forest with no electricity and no Internet.)

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