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Saturday, September 30, 2017

Stock Picking: Keys to Successful Investments

"What takes place in the short run for individual stocks and the market generally is unknowable. This is driven primarily by psychology. 

It is over longer periods that improving fundamentals that push stock prices higher become meaningful. In most cases, stock prices are a reflection of underlying profits. A company that consistently improves its earnings will see its shares rise over time."

Read more at:

http://www.investopedia.com/advisor-network/articles/101716/stock-picking-keys-successful-investments/

Wednesday, September 27, 2017

Nifty chart: a midweek technical update (Sep 27 ‘17)

FIIs were net sellers of equity worth Rs 40.2 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 44 Billion, as per provisional figures. 

Nifty touched a low of 9714 today, wiping out all gains of the previous 5 weeks in just 7 trading sessions. The index has dropped below a large 'rising wedge' pattern.

GST collection for Aug '17 was Rs 907 Billion - almost 4% lower than the downward revised Jul '17 figure of Rs 941 Billion. Senior political leaders have openly castigated the Finance Minister for the GST implementation mess and the havoc it has caused to small and medium enterprises.


The daily bar chart pattern of Nifty is undergoing another sharp bull market correction - just like the one it suffered last month. Only, this time it could be different.

The index tested support from the 'support/resistance' level of 9700 after falling below its 20 day and 50 day EMAs; all three daily technical indicators are looking bearish and showing downward momentum - just like they did in Aug '17. 

However, observant readers may note that all three indicators have fallen slightly lower than their respective Aug 11 '17 lows while Nifty has touched a slightly higher low.

The negative divergences, plus continuous heavy selling by FIIs may cause a breach of the support level of 9700, and drop the index to seek support from its rising 200 day EMA.

Support from the 20 week EMA (not shown), and short-covering before a long weekend can trigger a technical bounce. Bears are likely to use the steadily worsening economic scenario as an excuse to sell again.

If the index falls below its Aug 11 low of 9686, the 'rising wedge' will evolve into another bearish pattern called a 'broadening top' (higher high, lower low).

The index is trading well above its rising 200 day EMA in a bull market. The correction is improving the technical 'health' of the chart - but it may not be an opportune time to buy yet.

Nifty's TTM P/E has slipped a little to 25.36 - which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply from its overbought zone, and may limit index downside.

Stay invested and continue with your regular SIPs. Avoid bulk buying in unknown small-cap stocks.

Tuesday, September 26, 2017

Gold and Silver charts: bears try to assert themselves

Gold chart pattern


The following remark had appeared in the previous post on the daily bar chart pattern of Gold: "Expect more profit booking, and a pullback towards the 'Support/Resistance zone'."

The pullback may be turning into a correction. Gold's price dropped below the 'support/resistance zone' between 1300 & 1310 and closed below the 50 day EMA on Thu. Sep 21.

A subsequent short-covering bounce with good volume support took gold's price above the 'support/resistance zone' on Mon. Sep 25, but resistance from the 20 day EMA halted further upward progress.

Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI has recovered a bit to its neutral zone after falling below its 50% level. Slow stochastic is inside its oversold zone.

Gold's price is trading well above its rising 200 day EMA in a bull market. However, bears may try to assert themselves and push gold's price down towards the 200 day EMA.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in bull territory. The 'golden cross' of the 50 week EMA above the 200 week EMA is about to technically confirm a return to a long-term bull market. Weekly technical indicators are in bullish zones but not showing much upward momentum.

Silver chart pattern


The following remark had appeared in the previous post on the daily bar chart pattern of Silver: "Expect more bear selling, and a pullback towards the 200 day EMA."

The expected pullback turned into a correction. Silver's price dropped to close below its 200 day EMA on Thu. Sep 21. A technical bounce on Mon. Sep 25 faced strong resistance from the merging 50 day and 200 day EMAs.

Daily technical indicators are bearish. MACD has fallen to its neutral zone. RSI is in bearish zone and trying to move up to its 50% level. Slow stochastic is in its oversold zone.

Bulls may attempt to push silver's price above the 200 day EMA into bull territory. Bears are likely to prevent any such adventure.

On longer term weekly chart (not shown), silver’s price closed at its converging 20 week and 50 week EMAs, but well below its sliding 200 week EMA in a long-term bear marketWeekly MACD and RSI are in neutral zones. Slow stochastic has dropped down from its overbought zone and can trigger some more correction.

Monday, September 25, 2017

S&P 500 and FTSE 100 charts (Sep 22 '17): bears getting ready to attack?

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 failed to build on the previous week's breakout above the 2490 level. The index touched a new high of 2509 on Wed. Sep 20, but closed almost flat for the week.

All three EMAs are rising, and the index is trading above them in a bull market. However, daily technical indicators are correcting overbought conditions and can trigger a correction or some more consolidation.

In case the index falls below the 2490 level - and the possibility can't be ruled out because of a bearish weekly pattern (see below) - expect support from the zone between 2450 & 2470.

The war of words between the US President and North Korea's 'rocket man' is creating unnecessary tension that is keeping global markets on tenterhooks. Uncertainty in the market may be just the opportunity that bears are looking for.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but may be in the process of forming a bearish 'evening star' candlestick pattern. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: " ...the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity."

The index pullback resulted in a weekly close above the 200 day EMA and the 'support/resistance' level of 7300 - with a 1.3% gain for the week.

Daily technical indicators are in the process of correcting oversold conditions, but remain in bearish zones. Any attempt at rallying further is likely to face resistance from the falling 20 day and 50 day EMAs.

A dark bearish shadow (viz. a 'descending triangle' at an index top) is covering the chart. Bulls have their work cut out to retrieve the situation.

On longer term weekly chart (not shown), the index bounced up after receiving support from its 50 week EMA, and closed well above its 200 week EMA in a long-term bull market. The 20 week EMA is forming a bearish 'rounding top' pattern. Weekly MACD is falling below its signal line in bullish zone. RSI is trying to move above its 50% level. Slow stochastic is ready to re-enter its oversold zone.

Sunday, September 24, 2017

Sensex, Nifty charts (Sep 22, 2017): bulls forced to retreat after strong attack by bears

FII net selling in equities touched a huge Rs 54.5 Billion during the week. DII net buying in equities was worth Rs 35.8 Billion, as per provisional figures. Both indices closed lower - Sensex by 1.1%, Nifty by 1.2%.

Despite the heavy selling by FIIs in equities, India's foreign exchange reserves rose by $1.8 Billion to $402.5 Billion - thanks to heavy inflows into debt.

A recent spate of infrastructure project announcements by the government - like bullet train and industrial corridors - is expected to kick-start the credit and investment cycle that will benefit the banking sector, as per a statement by the SBI chairperson.

BSE Sensex index chart pattern


The following warning bell was sounded in last week's post on the daily bar chart pattern of Sensex: "Some more consolidation within the 'flag' and a breakout below it are possibilities."

The index faced strong resistance from the upper edge of the 'flag' pattern on Mon. & Tue. (Sep 18 & 19). On Tue, it formed a small 'reversal day' bar (higher high, lower close) that triggered a sharp correction.

The index closed below its 20 day EMA but above its 50 day and 200 day EMAs in a bull market. More importantly for bulls, it closed within the 'flag' pattern.

Daily technical indicators are in bullish zones but turning bearish. MACD is falling towards its signal line. ROC has crossed below its 10 day MA. RSI and Slow stochastic have fallen down from their respective overbought zones. 

Bulls may try to prevent a fall below the 'flag', but selling by bears may overwhelm them. Expect support from the 30700 level, and below it from the rising 200 day EMA.

The NDA government has admitted its failure on the economic front by announcing a fiscal stimulus. Recent IPOs have absorbed surplus cash that could have been invested in the secondary market.

The index recovery after the correction is likely to be 'U' shaped rather than 'V' shaped. In other words, there is no need to rush in to buy the current dip.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty touched a new high of 10179, but closed 120 points lower for the week, forming a 'reversal' bar. The previous 8 weeks' trading has formed a large 'rising wedge' pattern from which the likely breakout is downwards.

The 20 week and 50 week EMAs are rising, and the index is trading above them in a bull market. However, with FIIs selling heavily, a fall below the 'wedge' and the 20 week EMA appears likely.

Weekly technical indicators are in bullish zones but showing downward momentum. MACD is sliding below its signal line inside overbought zone. ROC has dropped towards its neutral zone. RSI and Slow stochastic are below their overbought zones and drifting down.

Nifty's TTM P/E has slipped a bit from last week to 25.95, which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is trying to emerge from its overbought zone and can trigger some more correction.

Bottomline? Sensex and Nifty charts have been consolidating sideways within bearish patterns, and look poised to breakout below the patterns. DII buying has been overwhelmed by FII selling. Any fiscal stimulus may further stoke inflation and widen the fiscal deficit. This may be a good time to stay away and let the correction play out.

Friday, September 22, 2017

Active Traders Focus Attention on Emerging Markets

"North American investors have started adjusting their investment allocation in favor of emerging markets in recent months in hopes of profiting from one of the strongest up trends anywhere in the public markets. 

In this article, we take a look at several charts and try to filter down exactly how international investors are looking to capture the rise in developing economies."

Read more at:


http://www.investopedia.com/news/active-traders-focus-attention-emerging-markets/

Wednesday, September 20, 2017

Nifty chart: a midweek technical update (Sep 20 ‘17)

FIIs were net sellers of equity worth Rs 30 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 16.4 Billion, as per provisional figures. Nifty touched a new closing high of 10153 on Mon. Sep 18 and a new intra-day high of 10179 on Tue. Sep 19.

After the fiasco of demonetisation, GST implementation is turning out to be another thorn in the flesh for the NDA government. The balloon of July's tax collection of Rs 950 Billion was punctured by input tax credit claims of Rs 650 Billion.

Tata Steel has announced a 50-50 joint venture in Europe with Thyssenkrupp. The JV is expected to absorb a large portion of Tata Steel Europe's debt (which was used to acquire Corus 9 years ago).


The daily bar chart pattern of Nifty touched a new high of 10179 on Sep 19, but formed a 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Despite strong selling by FIIs, large inflows into domestic mutual funds and the consequent buying by DIIs propelled the index to a new high. The index is trading well above its three rising EMAs in a bull market.

Daily technical indicators are in bullish zones. But caution is advised because MACD and RSI are showing negative divergences by touching lower tops while the index rose higher. Some correction or consolidation may follow.

The entire 7 weeks' trading from Aug '17 onward has formed a large 'rising wedge' pattern, which has bearish implications. Bulls are struggling to move the index above its Aug 2 top of 10138 in a convincing manner.

Nifty's TTM P/E is at 26.39 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is hovering just above its overbought zone, and can limit index upside.

Small investors may be feeling confused about what to do. Confusion comes from lack of a plan for long-term investing. As has been repeated ad nauseam in this blog, your asset allocation plan should decide what needs to be done regardless of the state of the market.

A bull market is supposed to climb a wall of worries. If you are tired of waiting for a correction and can't stop the urge to jump in to the market, select your stocks very carefully, and use a strict 'stop-loss' every time you buy a stock.

Tuesday, September 19, 2017

WTI and Brent Crude Oil charts: bulls finally breaking bear strangleholds

WTI Crude Oil chart


Bulls are on the verge of breaking the stranglehold of bears on the daily bar chart pattern of WTI Crude Oil

By moving above the Aug 1 top of 50.43 and touching an intra-day high of 50.85 on Sep 18, the bearish pattern of 'lower tops, lower bottoms' that dominated the chart for more than 6 months has been negated.

Bulls still have some work left before they can send bears packing. Oil's price failed to close above the Aug 1 top, and formed a 'long-legged doji' candlestick pattern - leaving the door open for another bear attack.

Sliding volumes during the month raises concerns that the rally may not sustain. The 'golden cross' of the 50 day EMA above the 200 day EMA, which will technically confirm a return to a bull market, is awaited.

Daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with oil's price. Slow stochastic appears to be forming a 'double top' reversal pattern inside its overbought zone, which can trigger a correction.

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are looking bullish. Slow stochastic is looking overbought.

Brent Crude Oil chart


The following comments were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "A 'rectangle' is usually a continuation pattern. Since oil's price entered the pattern from below during a rally, the logical breakout should be upwards (i.e. above 53)."

Oil's price broke out above the 'rectangle' on Sep 5, but the breakout wasn't accompanied by a volume surge that would have technically validated the breakout. 

It was no surprise that oil's price formed a 'reversal day' bar (higher high, lower close) on Sep 8 and pulled back to the top of the 'rectangle' on Sep 11. Those who missed buying on the breakout, got an opportunity to do so on the pullback.

Oil's price rose above 55.50, but formed another 'reversal day' bar on Sep 18, which may lead to some correction or consolidation. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.

Daily technical indicators are looking bullish. Slow stochastic may be forming a 'double top' reversal pattern inside its overbought zone. That may trigger some correction or consolidation. 

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are looking bullish. Slow stochastic is looking quite overbought and can limit further upside.

Monday, September 18, 2017

S&P 500 and FTSE 100 charts (Sep 15 '17): bulls rule one, bears rule the other

S&P 500 index chart pattern


The following remarks were made in last week's post on the daily bar chart pattern of S&P 500

"The index may be in the process of forming a 'diamond' pattern. A 'diamond' can be a reversal pattern or a continuation pattern. So, await the breakout before deciding to buy or sell. An upward breakout above 2480 will be bullish. A downward breakout below 2440 will be bearish."

On Mon. Sep 11, the index opened trading with an upward 'gap' and broke out above the 'diamond' pattern and the 2480 level. It closed just below 2490. During the rest of the week, the index consolidated sideways with an upward bias, and closed at a lifetime high of 2500 - with a gain of 1.6% on a weekly closing basis.

Note the large spike in volume on Fri. Sep 15. That may be the sign of a 'buying climax' that can lead to a pullback towards the 'diamond' pattern. Such a pullback will provide a buying opportunity to those who missed buying on the upward break out.

Daily technical indicators are in bullish zones. MACD is rising above its signal line in overbought zone. RSI is moving sideways below its overbought zone. Slow stochastic is well inside its overbought zone. MACD and RSI are showing negative divergences by failing to touch new highs with the index.

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 in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The following remark in last week's post on the daily bar chart pattern of FTSE 100 provided adequate warning to investors: "A likely downward breakout below 7300 can lead to a test of support from, or even a breach of, the 200 day EMA."

The index made a couple of futile attempts to move above the (purple) down trend line on Mon. Sep 11 & Tue. Sep 12. Bears took control right away.

On Thu. Sep 14, the index dropped and closed just below the support level of 7300. On Fri. Sep 15, the index fell sharply below the 200 day EMA and the 7200 level intra-day, before managing to close above 7200 - with a loss of 2.2% on a weekly closing basis.

(At the time of writing this post, the index is in the process of pulling back towards the 200 day EMA. Those who missed selling on Friday's downward break out can use the pullback as a selling opportunity.)

Daily technical indicators are looking bearish and showing downward momentum. Some more correction - perhaps a test of the Apr '17 low of 7100 - is possible.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA and is seeking support from its 50 week EMA, but closed well above its 200 week EMA in a long-term bull market. Weekly MACD is falling below its signal line in bullish zone. RSI has fallen below its 50% level. Slow stochastic has re-entered its oversold zone.

Sunday, September 17, 2017

Sensex, Nifty charts (Sep 15, 2017): bulls trying to regain control

FIIs were net sellers of equity worth Rs 33.6 Billion for the week. DIIs were net buyers of equity worth Rs 38.3 Billion, as per provisional figures. Sensex gained 1.8% and Nifty gained 1.5% on weekly closing basis.

WPI inflation rose to a 4 month high of 3.24% in Aug '17, against 1.88% in Jul '17 and 1.09% in Aug '16 as prices of vegetables soared.

India's exports grew 10.29% while imports grew 21% in Aug '17. The trade deficit widened to $11.64 Billion against $7.7 Billion in Aug '16 - mainly due to higher oil and gold imports. 

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex gained nearly 600 points for the week as bulls tried to regain control of the chart. The index is trading above its three rising EMAs in a bull market.

The 20 day EMA and the MACD signal line are forming bullish 'saucer' patterns, but bears have not been routed yet. 

Sensex is more than 400 points below its lifetime high of 32686 (touched on Aug 2). After breaking out above a bearish 'rising wedge' pattern (refer last week's post), the index is consolidating within a bearish 'flag' pattern.

Daily technical indicators are in bullish zones, but sending conflicting signals. MACD is rising above its signal line. ROC has dropped to seek support from its 10 day MA. RSI is retreating after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways inside overbought zone.

Some more consolidation within the 'flag' and a breakout below it are possibilities. Note that FIIs were net buyers of equity on Fri. Sep 15. If they continue buying, the scales will tip towards bulls.

Stay invested. Remain cautiously optimistic.

NSE Nifty index chart pattern




The weekly bar chart pattern of Nifty moved above the 'rising wedge' pattern formed during the previous 4 weeks, but faced resistance from the lifetime high level of 10138 (touched in the week ending on Aug 4 '17).

The past 7 weeks' trading appears to have formed an 'ascending triangle' pattern from which the likely break out is upwards.

Note that the index is in the process of forming either a continuation or a reversal pattern. Just as a bearish 'rising wedge' turned into a bullish 'ascending triangle', the pattern may further evolve to form a 'rectangle' or a 'broadening top' pattern.

The index is trading above its two rising weekly EMAs in a bull market. Bulls will regain control only after a convincing move above the lifetime high of 10138. That hasn't occurred yet. 

Weekly technical indicators are looking overbought. MACD is moving sideways below its signal line inside overbought zone. ROC  has merged with its 10 week MA and moving sideways below its overbought zone. RSI is rising towards its overbought zone. Slow stochastic is about to enter its overbought zone.

Nifty's TTM P/E is now at 26.24 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating near the edge of its overbought zone and can limit index upside. 

Bottomline? Sensex and Nifty charts have been consolidating sideways with upward biases for the past 5 weeks. DII buying seems to have negated the 
earlier bearishness. FIIs are still selling. Inflation and the trade deficit are rising. The low Jul '17 IIP number shows that manufacturing growth remains muted. So, caution is advised.

Friday, September 15, 2017

7 Habits that can lead to Future Wealth

Unless you expect to win the lottery, or inherit the estate of a wealthy aunt, or write a killer app that Google or Amazon pays several million dollars to acquire - it is unlikely that you will get wealthy overnight.

Forget about the rags-to-riches stories. Most of them are really that - stories. People who are wealthy have put in a lot of time and effort to achieve their successful financial status.

If you wish to own a tree that will bear delicious fruits for many years, you won't be able to just buy it. You need to buy a sapling from a nursery, plant it, water it, fertilise it, protect it from the elements for several years before it can bear fruits.

To build wealth for the future, you need to make long-term plans and have a disciplined approach towards saving and investing. It is possible to do it on your own. But it is better if you seek advice from an experienced financial planner.

Sarah Chandler explains 7 habits that can lead to future wealth in an article in investopedia.com. Read it here.

Thursday, September 14, 2017

Nifty chart: a midweek technical update (Sep 13 ‘17)

Net selling in equities by FIIs touched Rs 24.5 Billion during the first three days of trading this week. DIIs more than matched them with their net buying - worth Rs 29.2 Billion, as per provisional figures.

A flood of domestic liquidity propelled Nifty to breakout above the bearish 'rising wedge' pattern that had formed after a correction from a 'diamond' pattern.

India's macroeconomic situation remains a concern. CPI inflation rose to 3.36% in Aug '17 against 2.36% in Jul '17. The IIP improved to 1.2% in Jul '17 against -0.2% in Jun '17, but was much lower than 4.5% in Jul '16.

The combination of rising inflation and muted industrial growth may force RBI to maintain status quo on interest rates.


The daily bar chart pattern of Nifty broke out above the 'rising wedge' pattern on Tue. Sep 12, and tested its lifetime Aug 2 high of 10138 on Wed. Sep 13.

Time to send the bears packing? Not yet. The index retreated after touching a slightly lower top of 10132 - forming a 'reversal day' bar (higher high, lower close) that often marks an intermediate top. 

If the index fails to rally past its Aug 2 high of 10138 and starts correcting instead, a 'double top' reversal pattern may form - with a downward target of 9240.

The 'double top' will be technically confirmed only if Nifty falls below its Aug 11 low of 9686. With DIIs buying heavily, the probability of that happening seems low.

However, the break out below the 'diamond' followed by the formation of a bearish 'rising wedge' pattern should be treated with caution. If the index starts to correct and drops back inside the 'wedge' then bullish bets should be kept on hold.

Daily technical indicators are in bullish zones. MACD is showing upward momentum but RSI is not. Slow stochastic is inside its overbought zone and can trigger a pullback towards the 'rising wedge'.

Nifty's TTM P/E is at 26.23 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone and may limit index upside.

Nifty is trading above its three rising EMAs in a bull market. However, the index has been hesitating after touching a lifetime high 6 weeks back. Small investors should also hesitate before deciding to jump into the market feet first. When everyone appears to be greedy, one should be fearful.

Tuesday, September 12, 2017

Gold and Silver charts: bulls run riot

Gold chart pattern


Bulls are running riot on the daily bar chart pattern of Gold. Geopolitical concerns, a severe hurricane (Irma) in Florida and a sliding US Dollar index combined to send gold's price soaring past the 1360 level on Fri. Sep 8.

Note how the zone between 1300 & 1310, which had acted as a strong resistance zone since Nov '16, has now turned into a support zone. Gold's price is trading well above its three rising EMAs in a bull market.

Overbought technical indicators and negative divergence visible on Slow stochastic (which failed to touch a new high with gold's price) triggered a corrective move with a downward 'gap' on Mon. Sep 11.

North Korea tensions have eased a bit. Irma was less severe than expected. The Dollar index has recovered somewhat. Expect more profit booking, and a pullback towards the 'Support/Resistance zone'.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in bull territory. The impending 'golden cross' of the 50 week EMA above the 200 week EMA will technically confirm a return to a long-term bull market. Weekly MACD and Slow stochastic are looking overbought. RSI has moved down after facing resistance from the edge of its overbought zone.

Silver chart pattern


The following remark was made in the previous post on the daily bar chart pattern of Silver: "Any further rally towards 17.75-18 may invite bear selling and a pullback towards the 200 day EMA."

Note that silver's price rallied to touch 18.25 on Fri. Sep 8 before bears decided to step-in. The longer term 'Support/Resistance zone' between 18.50 & 18.75 was not tested.

Silver is trading above its three rising EMAs in bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

Daily technical indicators are looking overbought. Slow stochastic is showing negative divergence by failing to touch a new high with silver's price. Expect more bear selling, and a pullback towards the 200 day EMA.

On longer term weekly chart (not shown), silver’s price retreated after facing strong resistance from its 200 week EMA, but closed above its 20 week and 50 week EMAs in a long-term bear marketWeekly MACD and RSI are in bullish zones. Slow stochastic is well inside its overbought zone and can trigger a pullback towards the 50 week EMA.

Monday, September 11, 2017

S&P 500 and FTSE 100 charts (Sep 08 '17): bears refuse to give up

S&P 500 index chart pattern


The following comment appeared in last week's post on the daily bar chart pattern of S&P 500: "Slow stochastic has entered its overbought zone, and may trigger a pullback towards the 'Support/Resistance zone'."

On a holiday-shortened trading week, the index formed a small downward 'gap' of 2 points and dropped below the 'Support/Resistance zone' intra-day on Sep 5. It managed to bounce up and close just below 2460 (inside the 'Support/Resistance zone').

For the rest of the week, the index traded in a range between 2460 & 2470 but touched lower tops each day. The index closed above its three rising EMAs in a bull market, but lost 0.5% on a weekly closing basis.

Daily technical indicators are in bullish zones but giving conflicting signals. MACD is rising above its signal line. RSI is seeking support from its 50% level. Slow stochastic has dropped from its overbought zone.

The index may be in the process of forming a 'diamond' pattern. A 'diamond' can be a reversal pattern or a continuation pattern. So, await the breakout before deciding to buy or sell.

An upward breakout above 2480 will be bullish. A downward breakout below 2440 will be bearish. The pattern is still forming, and may not turn out to be a 'diamond' at all - but forewarned is forearmed.

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. Only Slow stochastic is showing upward momentum.

FTSE 100 index chart pattern


The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "... a convincing move above the Aug 8 '17 top of 7552 is required if bulls are to regain control of the chart." 

The index failed to build on its previous week's bullishness as resistance from the (purple) down trend line proved to be too strong. 

After falling below its 20 day and 50 day EMAs to an intra-day low of 7322 on Sep 6, the index ended the week with a loss of 0.8% on a weekly closing basis.

FTSE is still trading above its rising 200 day EMA in a bull market, but the formation of a large bearish 'descending triangle' pattern should be a red flag for bulls.

Daily technical indicators are not showing any upward momentum. MACD and RSI are in bearish zones. Slow stochastic is seeking support from its 50% level.

A likely downward breakout below 7300 can lead to a test of support from, or even a breach of, the 200 day EMA.

On longer term weekly chart (not shown), the index closed at its 20 week EMA, and above its rising 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is sliding below its falling signal line in bullish zone. RSI has bounced up a bit after receiving support from its 50% level. Slow stochastic is in bearish zone but showing some upward momentum.

Sunday, September 10, 2017

Sensex, Nifty charts (Sep 08, 2017): consolidating within bearish 'rising wedge' patterns

FIIs were net sellers of equity worth Rs 34.3 Billion during the week. DIIs were net buyers of equity worth only Rs 12.1 Billion. Sensex and Nifty closed lower for the week - Sensex by 0.6%, Nifty by 0.4% - while both consolidated sideways within 'rising wedge' patterns.

The government has imposed countervailing duties for 5 years on imports of certain flat steel products from China in an effort to protect domestic industry from unfair competition. 

The Rupee closed at its highest level against the US Dollar in a month on heavy unwinding of Dollars by exporters and corporates.

BSE Sensex index chart pattern


The daily bar chart pattern of Sensex shows that honours were even between bulls and bears. The index lost 200 points but managed to close above its 50 day EMA through the week.

The 200 day EMA is rising, and the index is trading 650 points above its long-term average in a bull market. The index has been consolidating sideways within a 'rising wedge' pattern for the past 4 weeks after correcting sharply from its lifetime high of 32686.

The pricewise and timewise correction is improving the technical 'health' of the chart. However, the likely breakout below the 'rising wedge' pattern, and a test of support from the 200 day EMA are possibilities that can't be overlooked.

Daily technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is slowly rising above its signal line, but remains in bearish zone. ROC has crossed below its rising 10 day MA, but remained in bullish zone. RSI has crossed above its 50% level. Slow stochastic is descending towards its 50% level.

With a falling US Dollar index, selling by FIIs is likely to continue. DII buying can not prop up the index indefinitely. So, be prepared for some more consolidation and correction.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty consolidated sideways within a 'rising wedge' pattern for the 4th straight week. The likely breakout from such a pattern is downwards.

Both the weekly EMAs are rising, and the index is trading above them in a bull market. The 9700 level has provided good downside support to the index correction.

There is no need to panic if the index does fall below the 'rising wedge' and the 9700 level. In fact, it will provide a good opportunity to buy.

Weekly technical indicators are in bullish zones, but giving conflicting signals. MACD and RSI are showing downward momentum. ROC and Slow stochastic are showing upward momentum.

Nifty's TTM P/E is at 25.9 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has risen from its overbought zone, and may trigger a correction.

The near-term outlook for the index is looking more bearish than bullish. Stay invested, but maintain a stop-loss.

Bottomline? Sensex and Nifty charts are consolidating within bearish 'rising wedge' patterns for the past 4 weeks. FIIs are selling heavily. DII buying has protected the downside so far. Disappointing earnings growth of India Inc. and the low Q1 GDP number show that the economy isn't in great shape. So, buy only on a further dip (or, if the indices break out convincingly above the 'wedges').

Saturday, September 9, 2017

5 Powerful Candlestick Patterns

"Candlesticks build patterns that predict price direction once completed. Proper color coding adds depth to this colorful technical tool, which dates back to 18th century Japanese rice traders.

Steve Nison brought candlestick patterns to the Western world in his popular 1991 book, "Japanese Candlestick Charting Techniques." Many traders can now identify dozens of these formations ..."

Read more here.

Thursday, September 7, 2017

Nifty chart: a midweek technical update (Sep 06 ‘17)

FIIs have continued to sell equity in the spot market. Their net selling during the first four days of trading in Sep '17 totalled Rs 34.4 Billion. DIIs were net buyers of equity worth Rs 12.1 Billion.

Nifty has been trading sideways with an upward bias in a range between 9700 and 10000 since correcting down from the Aug 2 top of 10138. However, it has formed a 'rising wedge' pattern from which the likely breakout is downwards.

The Nikkei India Services PMI for Aug '17 was 47.5 - higher than 45.9 in Jul '17 but below the 50 level which indicates contraction. Call it the 'GST effect'. The Services PMI was also below 50 in the Nov '16 to Jan '17 period - thanks to demonetisation.


The daily bar chart pattern of Nifty had broken out below a 'diamond' pattern after touching a lifetime high of 10138 on Apr 2. Read all about the 'diamond' pattern and its implications in an earlier post.

After receiving support from the 9700 level on Aug 11, the index bounced up to touch 9948 on Aug 17 but entered a sideways consolidation within a bearish 'rising wedge' pattern.

Daily technical indicators are in bullish zones but not showing any upward momentum. MACD is moving sideways above its signal line. RSI is seeking support from its 50% level. Slow stochastic has dropped from its overbought zone.

Nifty's TTM P/E is at 25.88 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped sharply and entered its overbought zone - hinting at a correction.

A fall below the 'rising wedge' should receive some support from the 9700 level. If the support fails to hold, a deeper correction to test support from the rising 200 day EMA may follow.

Keep a close watch on the zone between 9700 and 10000. Bears will dominate below 9700. Bulls will rule above 10000. Where is the index headed first?

Don't place any bets, but the odds of a fall below 9700 first appears better. Why? Because a bull market requires earnings support to sustain and prosper in the long-term. And earnings of India Inc. has been disappointing to say the least.

DIIs don't have much choice but to keep buying as investors continue to pour money into mutual funds, because investments in realty and gold is no longer in fashion. But as long as FIIs keep selling, the index is not going to move much higher.

So, sit out the correction. Bravehearts can short the index if it falls below the 'rising wedge' (not a recommended strategy for novice investors).

Tuesday, September 5, 2017

WTI and Brent Crude Oil charts: bears continue to rule

WTI Crude Oil chart


Bears are in control of the daily bar chart pattern of WTI Crude Oil. Every attempt to rally by bulls is encountering strong selling. Oil's price is trading below its three EMAs in a bear market.

Daily technical indicators are in bearish zones. MACD is moving sideways below its falling signal line in bearish zone. RSI is also moving sideways - just below its 50% level. 

Slow stochastic showed positive divergence by touching a slightly higher bottom - but the subsequent technical bounce is facing strong resistance from the entangled 20 day and 50 day EMAs.

The bearish pattern of 'lower tops, lower bottoms' continues to dominate the chart - as it has done for the past 6 months.

In more bad news for oil bulls, Russian scientists claim to have created a technology for thermochemical gas fracturing that can be an alternative to hydraulic fracturing and could increase oil production by between 1.7 and 6 times.

On longer term weekly chart (not shown), oil's price closed below its 20 week and 50 week EMAs and well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are sliding down in neutral zones. Slow stochastic is showing downward momentum in bullish zone.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil has been consolidating sideways within a 'rectangle' pattern (between 50 & 53) for the past 6 weeks.

A 'rectangle' is usually a continuation pattern. Since oil's price entered the pattern from below during a rally, the logical breakout should be upwards (i.e. above 53). However, a 'rectangle' is not a reliable pattern as it can also act as a reversal pattern.

In other words, one needs to wait for a breakout - either above or below the pattern - to make a buy or sell decision.

Daily technical indicators are in bullish zones. However, MACD and RSI are showing negative divergences by touching lower bottoms. The formation of a 'hanging man' candlestick pattern on Fri. Sep 1 may trigger a corrective move towards 50.

On longer term weekly chart (not shown), oil's price closed above its 20 week and 50 week EMAs but well below its falling 200 week EMA in a long-term bear market. Weekly MACD and RSI are in neutral zones. Slow stochastic has entered its overbought zone.