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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. 

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