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Sunday, August 27, 2017

Sensex, Nifty charts (Aug 24, 2017): bulls fight back but bears remain on top

FIIs were net sellers of equity on all four days of a holiday-curtailed trading week. Their net selling was worth Rs 46.2 Billion. DIIs were net buyers of equity on all four days - their net buying was worth Rs 28.8 Billion.

Sensex and Nifty gained marginally (0.22% and 0.2% respectively) on a weekly closing basis but remained in down trends for the third week in a row.

The government has approved 9 FDI proposals worth Rs 50 Billion, including one from Amazon. Nandan Nilekani's return as Infosys CEO has brought renewed hope for investors.

BSE Sensex index chart pattern




The daily bar chart pattern of Sensex is in a down trend that started after the index hit a lifetime high of 32686 on Aug 2. 

The index made an attempt to breakout above the (blue) down trend line on Fri. Aug 25, but failed to do so after facing strong resistance from its 20 day EMA.

A small 'double bottom' reversal pattern appears to have formed just below the 50 day EMA. Similar patterns have also formed inside oversold zones of ROC, RSI and Slow stochastic. That may enthuse bulls to attempt another breakout.

Note that all four technical indicators are showing negative divergences by falling lower than their Jun '17 lows while the index touched a higher (double?) bottom. That should keep bears interested.

Technical indicators are in bearish zones. MACD is moving sideways below its falling signal line. ROC has crossed above its falling 10 day MA. RSI and Slow stochastic are trying to emerge from their respective oversold zones.

With FIIs continuing to sell, some more correction can't be ruled out. Expect stronger support from the 'Support zone' between 29220 and 30040. The 200 day EMA is just below 30000, and should also support the index.

Stay invested. Use any further correction to add to existing holdings.

NSE Nifty index chart pattern




For the third week in a row, the weekly bar chart pattern of Nifty traded below the (blue) down trend line. The 9700 level has provided good support so far. The index managed to close above 9850 after failing to do so in the previous week.

Weekly technical indicators have corrected overbought conditions. MACD has crossed below its signal line in overbought zone. ROC is moving up towards its 10 week MA after falling to its neutral zone. RSI is moving sideways below its overbought zone. Slow stochastic is falling towards its neutral zone.

The index is trading above its two rising weekly EMAs in a bull market. However, some more correction is possible. Note that ROC, RSI and Slow stochastic are showing negative divergences by falling lower than their Jun '17 lows while Nifty has remained higher.

Expect strong support from the 'Support zone' between 9015 and 9285. The 50 week EMA is inside the 'Support zone' and should help to support the index. Use the likely index dip to add to existing holdings.

Nifty's TTM P/E has moved up to 25.47, which is much above its long-term average. The breadth indicator NSE TRIN (not shown) is just below its oversold zone, and may limit index downside.

Bottomline? Sensex and Nifty charts are in down trends for the past three weeks. FIIs have been selling heavily. DII buying has protected the downside. Expect their tussle to last a while longer. Both indices are trading in bull markets. So, dips can be used to add.

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