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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. 

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