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Tuesday, February 28, 2017

Gold and Silver charts: bulls trying to wrest control

Gold chart pattern


Shortly after the previous post, the daily bar chart pattern of Gold crossed and closed above its 200 day EMA, but immediately faced selling pressure and corrected down to test support from its rising 20 day EMA.

The next leg of the bull rally has propelled gold's price past the 1250 level. The possibility was mentioned in the previous post.

All three daily technical indicators are looking overbought, and showing negative divergences by failing to touch new highs with gold's price. That can trigger some correction or consolidation.

The 'golden cross' of the 50 day EMA above the 200 day EMA which technically confirms a bull market, is still awaited. 

On longer term weekly chart (not shown), gold’s price has closed just above its 200 week EMA in long-term bull territory after four months. Weekly technical indicators have turned bullish, but Slow stochastic is overbought and can trigger a correction. 

Silver chart pattern


The daily bar chart pattern of Silver has rallied splendidly during the month of Feb '17 - soaring past its 200 day EMA to reach the 18.50 level after more than three months.

The 50 day EMA has just about managed to cross above the 200 day EMA - the 'golden cross' technically confirming a return to a bull market.

All three daily technical indicators are inside their overbought zones. Expect some resistance from the zone between 18.75 and 19 - and some correction or consolidation.

On longer term weekly chart (not shown), silver’s price has closed well above its 20 week and 50 week EMAs but just below its 200 week EMA in a long-term bear market. Weekly technical indicators are looking bullish. Slow stochastic is overbought and can trigger a correction.

Monday, February 27, 2017

S&P 500 and FTSE 100 charts (Feb 24 '17): consolidating before the next surge

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 quickly jumped above the 2360 hurdle on Tue. Feb 21, but failed to make further progress during the rest of a holiday-shortened week.

All three EMAs are rising, and the index is trading above them in a bull market. 

Daily technical indicators are well inside their overbought zones. Though an index can remain overbought for long periods, technically a correction is overdue.

The index seems to be rising on the back of a strong US Dollar and hopes of an economic stimulus by the Trump administration.

On longer term weekly chart (not shown), the index closed at a new lifetime high of 2367, and is trading well above its three rising weekly EMAs in a long-term bull market. All three weekly technical indicators are inside their overbought zones - hinting at a correction.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 touched 7329.56 - a new high for the month - on Mon. Feb 20, but failed to sustain above the 7300 level.

On Fri. Feb 24, the index corrected sharply below its 20 day EMA and the 7200 level before bouncing up to close at its 20 day EMA - losing about 0.8% on a weekly closing basis.

An overbought Slow stochastic may have triggered the brief correction (refer last week's post).

Daily technical indicators are in bullish zones but showing downward momentum. Some more correction or consolidation is possible. 

The index appears to be consolidating within a large 'symmetrical triangle' since touching a lifetime high of 7354 on Jan 16 '17. A breakout from the triangle can occur in either direction.

On longer term weekly chart (not shown), the index has closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but looking a bit overbought.

Saturday, February 25, 2017

Sensex, Nifty charts (Feb 23, 2017): bulls relentlessly charge ahead

In a holiday-shortened trading week, FIIs were net sellers of equity worth Rs 17.4 Billion, as per provisional figures. DIIs were net buyers of equity worth Rs 28.4 Billion - thanks to continuous inflows into domestic mutual funds.

As mentioned in the concluding comment of last week's post, both indices touched new highs. Nifty touched a new 52 week high and Sensex touched a 5 months high (falling just short of its Sep 8 '16 top).

According to D&B's latest economic forecast, India's IIP will remain muted between 0-0.5% in Jan '17. FDI in 2016 grew by 18% to US $46 Billion from $39.3 Billion in 2015.

BSE Sensex index chart pattern


The daily bar chart pattern of Sensex closed higher on all four trading days of the week - touching an intra-day high of 29065 on Thu. Feb 23 and testing its previous top of 29077 (touched on Sep 8 '16).

However, the index closed near its lowest level for the day, forming a 'shooting star' candlestick pattern. That can trigger a correction or consolidation. Any dip towards the blue up trend line will provide an adding opportunity.

Daily technical indicators are looking overbought. All four are showing negative divergences by failing to touch new highs with the index. Some correction or consolidation will improve the technical 'health' of the chart, and enable Sensex to touch a new lifetime high.

Bulls are clearly in control. That doesn't mean you should throw caution to the wind. Be very selective in your picks if you do decide to add during the next likely dip.

Some selling can be expected near a previous index top. If you are sitting on good profits - particularly in small-cap or mid-cap stocks, which are still rising and looking strong on the charts - now may be a good time to take some of the profits off the table.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty not only touched a new 52 week intra-week high but closed at a lifetime high level of 8939.50. The index is trading well above its two rising weekly EMAs in a bull market.

Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index.

An index can remain overbought for long periods during bull rallies. However, sliding volumes during last week's rally and negative divergences on technical indicators may be hinting at a pullback towards 8750.

Nifty's TTM P/E remains well above its long-term average at 23.36. The breadth indicator NSE TRIN (not shown) has resumed its fall inside its overbought zone.

Upside risk appears to be increasing by the day. Despite a not-so-strong economy, domestic liquidity flows are sustaining the market in the near term. 

Bottomline? Bulls are clearly in control of Sensex and Nifty charts. The best time to book partial profits is when experts are only recommending 'buy' calls and everyone is feeling happy counting their 'paper profits'.

Wednesday, February 22, 2017

Nifty chart: a midweek technical update (Feb 22 ‘17)

FIIs were net sellers of equity worth Rs 21.3 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 32.8 Billion, as per provisional figures.

Nifty moved above 8950 today and tested its Sep '16 top of 8969, but faced profit booking and closed below 8950. In the process, it formed a 'doji' candlestick pattern indicating indecision among market participants.

After Cognizant, TCS announced a share buyback scheme (at a premium to CMP) - putting pressure on other IT majors like Infosys, HCL Tech and Wipro to follow suit. 


The daily bar chart pattern of Nifty closed higher for the fifth trading session in a row - gaining more than 200 points (about 2.3%).

All three EMAs are rising and the index is trading well above them in a bull market. 

Daily technical indicators are inside their overbought zones. MACD and Slow stochastic are showing negative divergences by failing to rise higher with the index.

Nifty's TTM P/E is at 23.32 - much above its long-term average. The breadth indicator NSE TRIN (not shown) has corrected its extreme overbought condition but remains within its overbought zone.

Near term index upside appears limited. Nifty may move down to fill the 20 points upward 'gap' formed on Fri. Feb 17.

Tuesday, February 21, 2017

WTI and Brent Crude Oil charts: consolidating sideways with an upward bias

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil has failed to make much upward progress since touching a 52 week high on Jan 3. 

Oil's price has been consolidating sideways in a range between 50.50 and 54.50 with a slight upward bias - as can be seen from the gradually rising 20 day EMA.

Daily technical indicators are in bullish zones. MACD and RSI are moving sideways. Slow stochastic is showing a bit of upward momentum.

Eventually there will be a breakout from the trading range. Expect it to be upwards - to the 59-60 zone.

On longer term weekly chart (not shown), oil's price is trading above its rising 20 week and 50 week EMAs, but below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but only Slow stochastic is showing some upward momentum.

Brent Crude Oil chart


After touching a 52 week high on Jan 3, the daily bar chart pattern of Brent Crude Oil has been stuck in a range between 53.50 and 57.50.

The gradually rising 20 day EMA indicates that bulls have retained control during the sideways consolidation.

Daily technical indicators are giving conflicting signals - which is often the case during sideways consolidations. MACD is sliding below its signal line in positive zone. RSI is moving sideways along its 50% level. Slow stochastic has dropped below its 50% level.

A likely upward breakout from the trading range can take oil's price to the 61-62 zone.

On longer term weekly chart (not shown), oil's price is trading above its rising 20 week and 50 week EMAs, but below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but not showing any upward momentum.

Monday, February 20, 2017

S&P 500 and FTSE 100 charts (Feb 17 '17): bulls firmly in the saddle

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 is continuing with its gravity-defying act. After soaring past the 2300 level - where it had faced some resistance - the index has paused to catch its breath at 2350.

All three EMAs are rising, and the index is trading above them in a bull market. Bulls are using the slightest of dips to buy. However, the widening distance between the index and its 200 day EMA is a red flag.

Daily technical indicators are well inside their overbought zones. A similar occurrence two months back had triggered a 2% correction. 

On longer term weekly chart (not shown), the index closed at a new lifetime high of 2351, and is trading well above its three weekly EMAs in a long-term bull market. All three weekly technical indicators are inside their overbought zones.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 shook off a strong bear attack and climbed 200 points in two weeks. It is facing some resistance at the 7300 level.

Daily technical indicators are in bullish zones, but not showing much upward momentum. Slow stochastic is inside its overbought zone, and can trigger a correction.

Expect bulls to buy any dip. The index should cross above its previous top (7354 touched on Jan 16 '17) in the near future. 

On longer term weekly chart (not shown), the index has closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but looking overbought.

Sunday, February 19, 2017

Sensex, Nifty charts (Feb 17, 2017): bulls asserting themselves

FIIs were net buyers of equity worth a massive Rs 80.5 Billion during the week - thanks to RBI's lifting of ban on buying HDFC Bank stocks on Fri. Feb 17. The ban was reintroduced later in the day as FII buying limit of 74% was exceeded. 

DIIs were net sellers of equity worth Rs 45.4 Billion during the week, as per provisional figures. Both Sensex and Nifty closed at their highest levels in nearly 5 months.

In a move that will help implementation of GST from Jul 1, the GST Council approved a draft compensation law to reimburse any revenue loss to States

BSE Sensex index chart pattern


The daily bar chart pattern of Sensex consolidated sideways near the 'support-resistance' level of 28250 for two weeks, and successfully tested support from the up trend line drawn from the Dec 26 '16 low on Thu. Feb 16.

On Fri. Feb 17, the index opened with a big upward 'gap' but faced profit booking and closed near the low point of the day. Remember that a trend line gets stronger with each test of support (or resistance).

Daily technical indicators have corrected overbought conditions and remain in bullish zones, but are showing negative divergences by failing to rise higher with the index. Some more consolidation is likely prior to F&O expiry on Thu. Feb 23.

All three EMAs are rising and the index is trading above them in a bull market. Occasional dips towards the up trend line are providing adding opportunities.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty has crossed above the resistance level of 8750 with strong volume support. Despite the best effort of bears, it is just a matter of time before the index crosses above its Sep '16 top of 8969.

Weekly technical indicators are looking bullish and a bit overbought. Nifty's TTM P/E has remained above 23 for most of the month - much above its long-term average.

However, the breadth indicator NSE TRIN has moved up from the extreme overbought zone - giving hopes of some more upside for the index.

Expect the index to consolidate a little around the current level before attempting to cross above its Sep '16 top.

Bottomline? Sensex and Nifty charts show that bulls are regaining control slowly and surely. FIIs are buying again. Both indices should touch new highs soon. 

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.)

Tuesday, February 7, 2017

Gold and Silver charts: bulls overcome resistance zones

Gold chart pattern


The daily bar chart pattern of Gold faced strong resistance from the 'support-resistance' zone between 1200 and 1220 (refer previous post) and dropped below its 20 day and 50 day EMAs to 1180 on Jan 27.

An overbought Slow stochastic was expected to trigger a correction - and it did. A sliding US Dollar index led to a sharp recovery that propelled gold's price past 1220 and its 200 day EMA into bull territory on Feb 6.

All three daily technical indicators are looking overbought, and showing negative divergences by failing to touch new highs. Some consolidation or correction is likely.

However, with the US Dollar index expected to correct a bit more, gold's price can move up to the zone between 1250 and 1260.

On longer term weekly chart (not shown), gold’s price has closed above its 20 week and 50 week EMAs but below its 200 week EMA in a long-term bear market. Weekly technical indicators are turning bullish. 

Silver chart pattern


The daily bar chart pattern of Silver faced strong resistance from its 200 day EMA and corrected to an intra-day low of 16.6 on Jan 27, but closed higher (above 17.1) - forming a 'reversal day' bar.

On Jan 31, silver's price followed the yellow metal's lead in crossing above its 'support-resistance' zone between 17 and 17.50 (refer previous post), and closed above its three EMAs in bull territory.

It has since been consolidating sideways with a slight upward bias. Daily technical indicators are bullish, but Slow stochastic is showing negative divergence by failing to move higher.

Some consolidation can be expected before silver's price can move up to the zone between 18 and 18.50.

On longer term weekly chart (not shown), silver’s price has closed above its 20 week and 50 week EMAs but below its 200 week EMA in a long-term bear market. Weekly technical indicators are looking bullish.

Monday, February 6, 2017

S&P 500 and FTSE 100 charts (Feb 03 '17): bulls fight off a bear attack

S&P 500 index chart pattern


The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "There is also a possibility of the entire trading above the 'gap' forming an 'island reversal' pattern should the index fall with a downward 'gap' during the next few days."

Note that the index opened with a downward 'gap' on Mon. Jan 30 - turning the previous three trading bars into an 'island' (marked by grey ellipse). Though the index dropped sharply below its 20 day EMA and the 2270 level intra-day, it bounced up to close above 2280.

During the next three days, the index consolidated sideways - dropping below its 20 day EMA intra-day but closing above it. On Fri. Feb 3, the index opened with an upward 'gap' and closed above 2290 - filling Monday's downward 'gap' and negating the 'island reversal' pattern.

However, the appearance of any 'reversal' pattern should be treated with respect. Though all three daily technical indicators are in bullish zones, they are showing negative divergences by touching lower tops even as the index touched its highest level of the week on Fri.

All three EMAs are rising and the index is trading above them in a bull market. The Jan 26 lifetime high of 2301 is within handshaking distance. The index should cross above it. This isn't a good time to buy due to the negative divergences visible on the technical indicators.

On longer term weekly chart (not shown), the index closed at a new lifetime high of 2297, and is trading well above its three weekly EMAs in a long-term bull market for the 48th straight week. All three weekly technical indicators are bullish but looking overbought.

FTSE 100 index chart pattern


The following remarks were made in last week's post on the daily bar chart pattern of FTSE 100: "Note that by touching a low of 7131, the index has retraced about 33% of its 675 point rally from the Dec 2 '16 low to the Jan 16 '17 top of 7354. A Fibonacci retracement of 38.2% can drop the index to 7100. Some support can be expected there."

Price charts don't understand arithmetic, but technical traders certainly do. That is the reason why Fibonacci retracement is used to calculate support or resistance levels.

On Mon. Jan 30, the index plummeted below the 7150 level but stopped just above 7100. On the next two days, the 7100 level provided good support to the index, while the 20 day EMA offered resistance.

On Thu. Feb 2 the index slipped down to 7094 intra-day, tested support from its rising 50 day EMA and bounced up to close at its highest level of the week - forming a 'reversal day' bar (lower low, higher close).

That was just the trigger bulls needed to attack. On Fri. Feb 3, the index rose sharply above the 7150 level and its 20 day EMA to close at its highest level in two weeks.

Daily technical indicators are beginning to turn bullish. MACD is below its sliding signal line in positive zone, but has stopped falling. RSI has moved above its 50% level. Slow stochastic is about to emerge from its oversold zone.

The index is trading above its three EMAs in a bull market. Expect bulls to press home their technical advantage.

On longer term weekly chart (not shown), the index has formed a 'reversal bar' (lower low, slightly higher close) and closed well above its three rising weekly EMAs in a long-term bull market for the 32nd week in a row. Weekly technical indicators have corrected overbought conditions but remain in bullish zones.

Saturday, February 4, 2017

Sensex, Nifty charts (Feb 03, 2017): bulls back on top

For the second week in a row, both FIIs and DIIs were net buyers of equity. FII net buying was worth Rs 6.3 Billion; DII net buying totalled Rs 12.6 Billion, as per provisional figures. Both Sensex and Nifty gained more than 1% on a weekly closing basis.

Expected increase in service tax and re-introduction of long-term capital gains tax had been discounted by the market. When these provisions were not announced in the budget, bulls decided to celebrate.

Nikkei India's Services PMI came in at 48.7 in Jan '17 against 46.8 in Dec '16 - showing contraction (i.e. a number below 50) for the third straight month. The Composite PMI (including manufacturing) was 49.4 in Jan '17 against 47.6 in Dec '16.

BSE Sensex index chart pattern


The concluding remarks in last week's post on the daily bar chart pattern of Sensex were: "A pullback towards 27600 is a possibility. The dip can be used to add to existing holdings."

The index pulled back to 27600 on Jan 31 and even slipped slightly lower on Feb 1, before shooting up like a rocket after the Finance Minister's budget speech - forming a 'reversal day' bar (lower low, higher close).

On the next two days the index faced resistance from the 28250 level and consolidated with a slight upward bias, as the market tried to digest the budget provisions and DIIs resorted to some profit booking.

All three EMAs are rising again and the index is trading above them. The 'golden cross' (marked by green arrow) of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.

Daily technical indicators are looking overbought. MACD is rising along with the index but ROC, RSI and Slow stochastic are showing negative divergences (marked by blue arrows) by failing to move higher.

Some more consolidation or some correction is likely before the index makes an attempt to cross above its Sep '16 top of 29077.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty surged past the resistance level of 8675 with strong volume support after the Finance Minister's budget speech on Feb 1 but is facing resistance from the 8750 level.

Both weekly EMAs are rising and the index is trading above them in a bull market. The next target for bulls will be the Sep '16 top of 8969.

Weekly technical indicators are looking bullish. MACD has formed a bullish 'rounding bottom' pattern and crossed above its signal line into positive territory. ROC has entered its overbought zone after crossing above its 10 week MA. RSI has moved above its 50% level. Slow stochastic is poised to enter its overbought zone.

Sunny days are here again for bulls? It surely appears that way. However, Nifty's TTM P/E remains well above its long-term average at 23.29. The breadth indicator NSE TRIN (not shown) is deep inside its overbought zone.

Expect some correction or consolidation. The chart needs to improve its technical 'health' before it can rise to a new 52 week high.

Bottomline? Sensex and Nifty charts show that bulls are regaining control. The economy is shrugging off adverse effects of demonetisation. With FIIs buying again, both indices should touch new highs in the near future. POTUS remains a wild card that can trump the best laid plans of bulls.

Friday, February 3, 2017

Do you have the personality to be a good investor?

Anyone who is reasonably fit and has good hand-eye coordination should be able to pick up a tennis racket and start hitting balls over the net with very little effort. 

Does that mean s/he will become the next Serena Williams or Roger Federer? 
Obviously not! It has taken both those living legends many thousands of hours of coaching, practice and perseverance to be counted among the all-time greats.

Like tennis (or painting or playing the violin), investing is a skill that requires some talent but a lot more practice and experience to become really good. 

You won't become the next Warren Buffett just by opening a demat account and buying a few shares.

Buffett had a well-known 'guru' in Benjamin Graham - from whom he learned the ins and outs of the investment business. Then he put that learning into years of practice.

Can you still become a successful investor without aspiring to be a Warren Buffett? Sure you can!

But first you will need to learn some of the common behavioural traits that lead to sensible decision making which result in investment gains.

It always helps to have a 'guru' who can guide you in the initial stages. Even without one it is possible to learn and hone the skills that will enable you to make steady and consistent returns from your investments.

So, what are the personality traits that will make you a good investor?

In a recent article in investopedia.com, Lisa Smith discusses five 'money personalities'. Find out which one is the closest to yours, and then make the suggested changes.

Wednesday, February 1, 2017

Nifty chart: a midweek technical update (Feb 01 ‘17)

The Finance Minister introduced a 'please all' budget with benefits for the poor and the middle class, a focus on infrastructure development and bringing transparency to funding of political parties. 

DIIs celebrated by buying heavily. Their net buying in equities for the three days of trading this week crossed Rs 14 Billion. FIIs were also net buyers of equity, worth a more modest Rs 1.7 Billion, as per provisional figures. 

Nikkei India's Manufacturing PMI improved to 50.4 for Jan '17 against 49.6 in Dec '16. (A number above 50 indicates growth.) The economy has taken demonetisation of high value notes in its stride.



The daily bar chart pattern of Nifty had achieved its upward target of 8650 (mentioned in last week's update) on Fri. Jan 27, but faced resistance from the 8675 level.

The index pulled back to the support level of 8550 this week, but formed a large 'reversal day' bar (lower low, higher close) today as the market gave a thumbs-up to the budget provisions.

All three EMAs are rising and the index closed above the 8700 level after more than three months. Recent dips are being bought in a clear sign that bulls are in control.

Daily technical indicators are inside their overbought zones. RSI and Slow stochastic are showing negative divergences by failing to touch new highs with the index.

Nifty's TTM P/E is at 23.27 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen deep inside its overbought zone.

The index may consolidate or correct a bit before attempting to cross above its Sep '16 top of 8969.

Nifty has rallied strongly and gained more than 800 points (>10%) in 5 weeks. Upside risk is increasing. Be very selective if you decide to buy.