Wednesday, May 9, 2018

Nifty chart: a midweek technical update (May 09, 2018)

FIIs were net sellers of equity worth Rs 14.4 Billion during the three days of trading this week. DIIs were net buyers of equity worth Rs 26.2 Billion, as per provisional figures.

After first filling and then falling below the downward 'gap' and the up trend line last week, Nifty pulled back to close above the 'gap' today.

Walmart has acquired 77% stake in Flipkart for US $16 Billion, making it the largest eCommerce acquisition in the world. 

This can be a game-changer for Indian retail industry if Walmart replicate their African strategy of incentivising farmers to produce better quality vegetables and fruit, and then selling those products online.


The following remarks made in last week's update on the daily bar chart pattern of Nifty are worth noting: "The up trend line - typical of a counter-trend rally - is a bit too steep and unlikely to sustain much longer...Some consolidation or correction is possible, but a deep correction appears unlikely."

On Fri. Mar 4, the (purple) up trend line was breached, as expected. But the index didn't fall further. Instead, it has pulled back past the filled 'gap'. 

The interesting pattern to observe is that the index has failed to close above the trend line despite intra-day upward breaches on Mon. & Tue. (May 7 & 8). That may encourage bears to mount a stronger attack if the index tries to move up further.

Daily technical indicators are just below their respective overbought zones, but not showing much upward momentum. The index is trading above its three rising EMAs in a bull market. However, a fall below Friday's (May 4) low of 10602 may shift the advantage back to bears. 

Nifty's TTM P/E has moved up to 26.66 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone, and can limit index up side. 

Trump's pullout from the Iran nuclear deal will push oil prices higher. The stock market may have already discounted a BJP win in Karnataka state elections. Expect petrol pumps across India to raise prices next week.

If you are long in this market, either keep a tight stop-loss or, book some partial profits.

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