Friday, July 21, 2017

International ETFs that are Trouncing the Competition

"ETFs that appear similar on the surface may perform drastically different. Sometimes, an ETF may outperform its competitors for only a while and then fall back in line (or fall behind). Other ETFs tend to significantly outperform their competitors most of the time."

In a recent investopedia.com article, bullish chart patterns of four of the "hottest non-leveraged international ETFs" (viz. EMQQ, KWEB, PLND, SCIF) were discussed.

Read more here.

Wednesday, July 19, 2017

Nifty chart: a midweek technical update (Jul 19 ‘17)

FIIs were net buyers of equity worth Rs 16.9 Billion during the first three days of trading this week. DIIs were net sellers of equity worth Rs 14.3 Billion, as per provisional figures.

The index closed above the 9900 level for the first time on Mon. Jul 17. But bulls were stopped in their tracks as the GST Council raised the cess on cigarettes.

Nifty lost more than 120 points on Tuesday as bears battered the stock of ITC - which has a large weightage on the index.



The daily bar chart pattern of Nifty has been consolidating sideways within a 150 points range (between 9780 and 9930) after breaking out above a bullish 'ascending triangle' pattern on Mon. Jul 10.

All three EMAs are rising, and the index is trading above them in a bull market. The distance between the index and its 200 day EMA is more than 850 points, which indicates overbought condition as per empirical observations.

Daily technical indicators are also looking overbought. Nifty's TTM P/E is at 25.28 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen deep inside its overbought zone.

With all these technical signals flashing red, what should small investors do? Remember that indices (and stocks) can remain overbought for long periods. That doesn't mean it will be a straight-line rise to new highs.

Leo Puri, MD of UTI Asset Management, said in a recent TV interview: "There is a large space between the two extremes of greed and fear." Learn to become comfortable in that space.

If you have spent the time and effort in creating a good financial plan and an Asset Allocation plan, then there is nothing to worry about. Just stick to the plans regardless of index gyrations.

If you have been buying and selling willy-nilly based on tips or friendly advice, you may be in big trouble already. The best way to get out of trouble is not to 'average' but to get out of losing positions.

Avoid taking large positions on the long or the short side. Remember the story of the hare and the tortoise. Investing is a marathon, not a sprint. You need to have a plan and pace yourself along the way.


(Note: Thinking of adding quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for 2 more days only - till Jul 21, 2017. Contact me at mobugobu@yahoo.com for details.)

Tuesday, July 18, 2017

Gold and Silver charts: pullback rallies facing resistances

Gold chart pattern


The following remarks appeared in the previous post on the daily bar chart pattern of Gold: "The 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market. Bulls may try their best to prevent that."

Gold's price touched an intra-day low of 1204 on Jul 10, but bounced up to close higher - forming a 'reversal day' bar (lower low, higher close). That triggered a pullback rally which is facing resistance from the 20 day EMA.

Note that bulls managed to prevent the 'death cross' of the 50 day EMA below the 200 day EMA. At least for now. May not be for long.

Daily technical indicators have corrected oversold conditions, and are showing upward momentum inside bearish zones. The pullback rally may continue a bit further, but expect resistance from the converging 50 day and 200 day EMAs. 

Gold's price is trading below its 50 day and 200 day EMAs in a bear market. The fact that the price dropped below May 9 'valley' low of 1214 keeps the 'double top' reversal pattern in force (refer previous post), and the possibility of a deeper fall towards the Dec '16 low of 1130.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, and not showing any upward momentum.

Silver chart pattern


The following remarks were made in the previous post on the daily bar chart pattern of Silver: "Expect bears to sell on every rise. A test of the Dec '16 low is a possibility."

Silver's price dropped below its Dec '16 low to touch an intra-day low of 15.145 on Jul 10, but bounced up to close higher - forming a 'reversal day' bar (lower low, higher close). 

The subsequent pullback rally is facing resistance from the May 9 low. Bears can be expected to sell at any time.

Daily technical indicators have corrected oversold conditions and showing some upward momentum. Only Slow stochastic has entered bullish zone (above its 50% level). MACD and RSI are still in bearish zones.

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear marketWeekly technical indicators are in bearish zones and showing a bit of upward momentum.

Monday, July 17, 2017

S&P 500 and FTSE 100 charts (Jul 14 '17): bulls fight back but bears still lurking

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 consolidated below the (purple) down trend line during the first two days of the trading week - receiving good support from its rising 50 day EMA.

On Wed. Jul 12, the index formed a 10 points upward 'gap' and broke out above the down trend line. On Fri. Jul 14, the index rose to touch new intra-day and closing highs.

Note that a breakout with a 'gap' is considered to be more bullish technically. However, there was no significant increase in volumes during the breakout. Also, volumes on Friday decreased while the index touched a new high.

Daily technical indicators are looking bullish and showing upward momentum. MACD has crossed above its signal line in positive zone. RSI is climbing towards its overbought zone. Slow stochastic has entered its overbought zone.

Negative divergences visible on MACD and RSI - which touched lower tops while the index touched a new high - may trigger a pullback towards the down trend line.

The index is trading well above its three EMAs in a bull market.  US Fed's indication that low inflation would lead to a more gradual pace of monetary tightening was a trigger for bullish aggression.

On longer term weekly chart (not shown), the index closed at a new high - well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are inside their respective overbought zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 has spent 6 weeks in a down trend after touching a lifetime high of 7599 on Jun 2.

The index successfully tested support from the 7300 level on Tue. Jul 11 - forming a small 'triple bottom' reversal pattern that triggered a technical bounce above its 20 day and 50 day EMAs on Wed. Jul 12.

Bears used the opportunity to sell. The index dropped below its 20 day and 50 day EMAs, and the 'support-resistance' level of 7385 - but with a 27 points gain on a weekly closing basis.

While the index remains in a down trend, it is trading above its rising 200 day EMA in a bull market. Of the three daily technical indicators, MACD and RSI are in bearish zones; Slow stochastic has crossed above its 50% level into bullish zone.

The 'support-resistance' level of 7385 has become a clear battle line between bulls and bears. (At the time of writing this post, the index is trading above its 20 day and 50 day EMAs and the 7385 level.)

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 but not showing much upward momentum.

Sunday, July 16, 2017

Sensex, Nifty charts (Jul 14, 2017): at new highs after breakout from bullish ascending triangle patterns

FIIs and DIIs were both net buyers of equity during the week - worth Rs 12.6 Billion and Rs 10.4 Billion respectively, as per provisional figures. Sensex and Nifty rose to touch their highest ever levels - each gaining more than 2% on weekly closing basis.

India's WPI inflation eased to 0.9% in Jun '17 - its lowest level in 8 months - against 2.17% in May '17 and -0.1% in Jun '16. Pressure will now mount on RBI to reduce interest rates in its Aug '17 policy meeting.

India's exports grew 4.4% in Jun '17 to $23.56 Billion; imports grew 19% to $36.52 Billion. Trade deficit was lower at $12.96 Billion against $13.84 Billion in May '17, but much higher than deficit of $8.11 Billion in Jun '16. 

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex broke out above the 'ascending triangle' pattern within which it was consolidating since May 24 '17, and rose to touch new intra-day and closing highs above the 32000 level.

The index is trading above its three rising EMAs in a bull market. The breakout from the 'ascending triangle' (the possibility was mentioned in last week's post) has an upward target of about 32670.

Daily technical indicators are looking overbought. Though an index can remain overbought for long periods (check the Jan-Mar '17 period), the possibility of a pullback towards the top of the 'triangle' can't be ruled out.

Recent SEBI strictures on use of P-Notes may have triggered short-covering by FIIs - which may continue during the next couple of weeks.

Initial Q1 (Jun '17) results show no great improvement in earnings by India Inc. It may take another couple of quarters before earnings start to catch up with Sensex valuation.

Stock markets have a tendency to 'discount' good news in advance. So, waiting for a big correction to invest may not be a good idea. A correction usually happens when it is least expected. Maintaining SIPs and looking for pockets of fair valuation can work better. 

NSE Nifty index chart pattern



The following remark was made in last week's post on the weekly bar chart pattern of Nifty: "For the past 7 weeks, the index has been consolidating sideways - forming a possible 'ascending triangle' pattern from which the likely breakout is upwards." 

Note that a 'symmetrical triangle' is often an unreliable pattern because a breakout can occur in either direction. But an 'ascending triangle' is more reliable because a price breakout typically occurs above the pattern. 

Likewise for a 'descending triangle' pattern, where the breakout occurs below the pattern. Being able to identify these 'triangle' patterns can be very useful as the breakouts can be triggers for entering (or exiting).

Weekly technical indicators are inside their respective overbought zones and showing negative divergences by failing to touch new highs with the index. (On the daily chart, Nifty has formed a bearish 'hanging man' candlestick pattern.) A pullback towards the top of the 'triangle' is a possibility.

Nifty's TTM P/E has moved above 25 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped back into its overbought zone - which may limit index upside.

Bottomline? Sensex and Nifty charts rose to touch new lifetime highs on the back of combined buying by FIIs and DIIs. Caution is advised. Stay invested. Check Q1 (Jun '17) results to add good performers to your 'buy list'. 

(Note: There are always opportunities in the stock market if you know where to look. Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment NewsletterA limited number of new subscriptions are being offered till Jul. 21, 2017. Contact me for details: mobugobu@yahoo.com.) 

Friday, July 14, 2017

3 Charts Suggest Bullishness in Turkey, Japan and India

Due to the rising level of volatility in the US markets during the past few weeks, many investors are turning to country-specific ETFs to get better returns.

In a recent article in investopedia.com, bullish chart patterns of iShares MSCI Turkey ETF (TUR), iShares MSCI Japan ETF (EWJ) and PowerShares India Portfolio ETF (PIN) were discussed.

Read more here.

Wednesday, July 12, 2017

Nifty chart: a midweek technical update (Jul 12 ‘17)

In a change of strategy, FIIs turned net buyers of equity on all three days of this trading week. As per provisional figures, their total net buying was worth Rs 6.5 Billion.

DIIs were also net buyers of equity on the first two days of trading this week, which exceeded their net selling today. Their total net buying was worth Rs 9 Billion. The index closed today above the 9800 level for the first time ever.

CPI inflation declined to 1.54% in Jun '17 - its lowest level in 5 years - against 2.1% in May '17, on the back of lower food prices. The IIP number for May '17 slipped to 1.7% against a downwardly revised 2.7% in Apr '17 - raising hopes that RBI may reduce interest rates to give a boost to the shrinking industrial sector.



The following remarks appeared in last week's technical update on the daily bar chart pattern of Nifty: "Nifty may be forming an 'ascending triangle' pattern from which the likely breakout is upwards. Some more consolidation within the 'triangle' is likely before the index can rise to a new high."

Combined FII and DII buying triggered the upward breakout from the 'ascending triangle' pattern on Mon. Jul 10. However, a technical glitch at NSE considerably reduced trading hours that led to much lower trading volumes.

The index touched a lifetime intra-day high of 9830 on Tue. Jul 11 and a lifetime closing high of 9816 today. Note that all three daily technical indicators failed to touch new highs with the index. 

The negative divergences can lead to a pullback to the top of the 'triangle'. It will provide an entry opportunity to those who may have missed buying on the breakout.

The index is trading above its three rising EMAs in a bull market, but it is more than 800 points above its 200 day EMA - which indicates overbought condition as per empirical observations.

Daily technical indicators have entered their respective overbought zones. Nifty's TTM P/E is almost at 25 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone but showing a bit of downward momentum in neutral zone.

With FIIs back in buying mode, the index may move higher despite overbought technical conditions. Stay invested. Check Q1 (Jun '17) results to identify the better performing companies. Use the rally to get rid of non-performers in your portfolios. 

(Note: Looking to add good quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. A limited number of paid subscriptions are being offered till July 21, 2017Contact me for details: mobugobu@yahoo.com.)