Wednesday, April 4, 2018

Nifty chart: a midweek technical update (Apr 04, 2018)

FIIs were net sellers of equity on Mon. & Tue. (Apr 2 & 3) but net buyers today. Their total net selling was worth Rs 7.3 Billion. DIIs were net buyers of equity on Mon. & Tue. but net sellers today (Apr 4). Their total net buying was worth Rs 7.4 Billion.

Auto sales in Mar '18 showed good growth over Mar '17. Tata Motors (35%), TVS (27%), Royal Enfield (27%), Honda Motorcycle (23%), Ashok Leyland (20%), Maruti (15%), M&M (10%), Hyundai (7%) showed decent growth. Honda Car (-28%) and Toyota (-9%) showed de-growth.

India's manufacturing activity fell to a 5 months low as factory output and new orders rose at their slowest pace since Oct '17. The Nikkei India's Manufacturing PMI slipped to 51 in Mar '18 against 52.1 in Feb '18. However, it was the 8th straight month of expansion (a number >50). 


The daily bar chart pattern of Nifty continues to trade below a 33 points downward 'gap' formed on Feb 5 '18, and has been correcting within a downward-sloping channel for the past 7 weeks.

A brief intra-day foray above the 20 day EMA and the upper edge of the downward-sloping channel today was met with strong bear selling on fears of an escalating trade war between USA and China.

The index formed a large 'reversal day' bar (higher high, lower close) - wiping out the gains of the previous two days - and dropped to test support from its 200 day EMA.

The support from the 200 day EMA is unlikely to hold, as it had been breached twice already. Expect the index to move down towards its lower edge. Bulls may try to defend the (psychological) 10000 level.

Daily technical indicators are in bearish zones. RSI and Slow stochastic showed positive divergences by not falling lower with the index. That may have triggered the technical bounce towards the top of the channel.

Nifty's TTM P/E has moved up to 25.14 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has entered its oversold zone, and can limit index downside.

RBI's monetary policy meeting tomorrow (Apr 5) is expected to maintain status quo on interest rates. The next bullish trigger may come if Q4 (Mar '18) results show any significant improvement over Q3 (Dec '17) results.

Till then, Nifty is likely to grind down within the channel.

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