Tuesday, December 11, 2018

WTI and Brent Crude Oil charts: sharp corrections find floors for now

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil had slipped below the 50 level intra-day on Nov 29 & 30, but managed to close above 50 on both days. On Dec 6, oil's price successfully tested support from the 50 level.

Announcement of a 1.2 million barrels/day production cut by OPEC and non-OPEC oil producers from Jan '19 appears to have put a floor on oil's price at 50. However, three attempts to rally above 54 faced strong resistance from the falling 20 day EMA.

'Death cross' of the 50 day EMA below the 200 day EMA (marked by gray circle) has technically confirmed a bear market. Expect bears to remain in control despite the OPEC production cut because of demand slow down.

Daily technical indicators are in bearish zones after correcting oversold conditions. MACD has crossed above its signal line inside its oversold zone. RSI and Slow stochastic have emerged from their respective oversold zones, but are not showing any upward momentum.

On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking oversold. MACD is falling below its signal line in oversold zone. RSI is seeking support from the edge of its oversold zone. Slow stochastic is moving sideways well inside its oversold zone.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil touched an intra-day 52 week low of 57.50 on Nov 29 but bounced up to close at 59.50. It has since found a floor at 58 after a sharp 30 points fall from its Oct '18 top.

'Death cross' of the 50 day EMA below the 200 day EMA (marked by gray circle) has technically confirmed a bear market. An attempt by oil's price to rally above 63 met with strong resistance from the falling 20 day EMA. Some consolidation around current levels is likely.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. MACD has crossed above its signal line inside its oversold zone. RSI and Slow stochastic have emerged from their respective oversold zones, but are not showing any upward momentum.

On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line and has dropped inside its oversold zone. RSI has emerged from its oversold zone, but not showing any upward momentum. Slow stochastic is moving sideways inside its oversold zone.

Monday, December 10, 2018

S&P 500 and FTSE 100 charts (Dec 07, 2018): bears brook no nonsense from bulls

S&P 500 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "The next hurdle for bulls is the previous (Nov 7) index top of 2815. Bears can be expected to put up some resistance there - as they had done in Oct '18."

In a curtailed trading week, the index touched an intra-day high of 2800 on Mon. Dec 3. Bear resistance caused a drop to an intra-day low of 2773 before the index closed at 2790 (near its opening level) - forming a 'doji' candlestick pattern that some times mark a change of direction.

The next day, the index fell sharply below its three EMAs into bear territory. After the mid-week holiday (due to President Bush's funeral), bears attacked with renewed vigour. The index touched an intra-day low of 2621, but recovered substantially to close at 2696.

Bulls failed to drive home their advantage. The index touched an intra-day high of 2708 on Fri. Dec 7, but closed at 2633 - losing 127 points (4.6%) on a weekly closing basis.

The strong index volatility during the past two months is an indication of a transition from a bull to a bear market. (The volatility during Feb-Mar '18 was an advance warning of such a transition.) The impending 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market.

Daily technical indicators are looking bearish and showing downward momentum. MACD is about to cross below its signal line in bearish zone. RSI is falling below its 50% level. Slow stochastic is falling towards its oversold zone

All three indicators are showing positive divergences by touching higher bottoms - hinting at another pullback towards the 200 day EMA. Bears are likely to 'sell on rise' again.

On longer term weekly chart (not shown), the index closed below its sliding 20 week and 50 week EMAs, but above its 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI is falling after facing resistance from its 50% level. Slow stochastic is poised to fall inside its oversold zone.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 touched an intra-day high of 7145 on Mon. Dec 3, but faced strong resistance from its sliding 50 day EMA. That was a trigger for bears to go on the offensive after two months of sideways consolidation (marked by blue 'rectangle').

A 'rectangle' is usually a continuation pattern. Since the index was falling when it entered the 'rectangle', the likely breakout was downwards. But a 'rectangle' tends to be unreliable, so one needs to wait for the eventual breakout before taking any buy/sell decision.

The downward breakout occurred on Thu. Dec 6. The index touched an intra-day 52 week low of 6674 before recovering to close above 6700. A pullback to the lower edge of the 'rectangle' followed on Fri. Dec 7. Bears promptly used the pullback to sell.

The index lost 202 points (2.9%) on a weekly closing basis, and is trading well below its three EMAs in a bear market.

Daily technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI has bounced up after receiving support from the edge of its oversold zone. Stochastic is trying to emerge from its oversold zone. More correction is likely. 

On longer term weekly chart (not shown), the index touched a 2 year low and closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, and showing downward momentum. MACD is falling below its signal line. RSI is about to fall inside its oversold zone. Stochastic has re-entered its oversold zone.

Sunday, December 9, 2018

Sensex, Nifty charts (Dec 07, 2018): bears wrest the initiative from bulls

FIIs were net buyers of equity on Mon. & Thu. (Dec 3 & 6), but net sellers on the other three days of the week. Their total net selling was worth Rs 8.7 Billion. DIIs were net buyers of equity on Fri. (Dec 7), but net sellers on the other four days. Their total net selling was worth Rs 22.7 Billion, as per provisional figures.

India's Current Account Deficit (CAD) widened to US $19.1 Billion (2.9% of GDP) during Q2 (Sep '18) compared to US $6.9 Billion (1.1% of GDP) during Q2 (Sep '17) - mainly due to a large trade deficit. CAD was US $15.9 Billion (2.4% of GDP) during Q1 (Jun '18).

Members of OPEC pledged to reduce their production by 800,000 barrels per day for 6 months beginning Jan '19. Russia and other non-OPEC producers have promised to slash production by 400,000 barrels per day. OPEC members Iran, Venezuela and Libya have been granted exemption from the production cuts. 

BSE Sensex index chart pattern



The following remark was made in last week's post on the daily bar chart pattern of Sensex: "Note that RSI and Slow stochastic are showing negative divergences by touching lower tops, and can trigger a pullback below the 'gap' towards the 200 day EMA."

The index touched an intra-day high of 36446 on Mon. Dec 3, only to close 200 points lower. That triggered the expected pullback below the downward 'gap' (formed on Oct 4). 

On Thu. Dec 6, the index breached the uptrend line (connecting Oct 26 and Nov 26 lows) and dropped to seek support from its 200 day EMA. Friday's pullback found resistance from the uptrend line.

Sensex managed to close above its three EMAs in bull territory, but lost more than 500 points (~1.4%) on a weekly closing basis. Bears will most likely use Friday's pullback to sell.

Daily technical indicators are looking bullish to neutral. MACD is receiving support from its signal line in bullish zone. ROC has crossed above its 10 day MA in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has slipped below its 50% level.

RSI and Slow stochastic formed bearish 'double top' reversal patterns inside their respective overbought zones. The support zone between 33934 and 32372 is back in the picture again.

Oil prices are likely to rise, with consequent pressure on the Rupee. That will widen the CAD even further. State election results on Dec 11 is keeping the market on edge. FIIs have turned net sellers of equity. Bears have used the opportunity to wrest the initiative from bulls after a 5 weeks long counter-trend rally.

NSE Nifty index chart pattern



The possibility of a corrective move was mentioned in last week's post on the weekly bar chart pattern of Nifty. The index touched an intra-week high of 10941, but dropped below its 20 week EMA - forming a 'reversal' bar and closing more than 180 points (~1.7%) lower for the week.

A likely fall below the 50 week EMA will bring the support zone between 10283 and 9827 back into the picture. 

The 50% Fibonacci retracement level (10882) of the fall from the Aug '18 top to the Oct '18 low acted as a resistance for the 5 weeks long counter-trend rally - as Nifty failed to close above 10882.

Weekly technical indicators are in bearish zones, but not showing any upward momentum. MACD is moving sideways below its falling signal line. ROC is moving sideways after crossing above its falling 10 week MA. RSI and Slow stochastic are moving sideways.

Nifty's TTM P/E has moved down to 25.87, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is inside its oversold zone. Some index consolidation or correction is possible. 


Nifty is trading well above its 200 week EMA in a long-term bull market. A deeper correction will provide a very good buying opportunity.

Bottomline? FII buying had started counter-trend rallies on Sensex and Nifty charts from their Oct '18 lows. The rallies have run their course, and the down trends appear to have resumed. Possibility of opposition wins in a couple of state elections is keeping the market unsettled. Wait for the market to 'digest' election results - to be announced on Dec 11. Better entry points should become available.

Friday, December 7, 2018

Why use Technical Indicators?

Within technical analysis, indicators are used as a measure to gain further insight into to the supply and demand of securities. 

Indicators, such as volume, are used to confirm price movement and the probability that the given move will continue. 

Along with using indicators as secondary confirmation tools, they can also be used as a basis for trading as they can form buy-and-sell signals.

Read more at:
https://www.investopedia.com/university/indicator_oscillator/

Wednesday, December 5, 2018

Nifty chart: a midweek technical update (Dec 05, 2018)

FIIs were net buyers of equity on Mon. (Dec 3) but net sellers on Tue. & Wed. (Dec 4 & 5). Their total net selling was worth Rs 1.2 Billion. DIIs were net sellers on all three trading days this week. Their total net selling was worth Rs 21.2 Billion, as per provisional figures.

Nikkei India's Manufacturing PMI rose to an 11 months high of 54.0 in Nov '18 from 53.1 in Oct '18. It was the 16th straight month of expansion (>50). Nikkei India's Services PMI also rose to 53.7 in Nov '18 from 52.2 in Oct '18. The Composite (Mfg. + Services) PMI rose to 54.5 in Nov '18 from 53.0 in Oct '18.

RBI announced an expected status quo on interest rates at its policy meeting today, but kept its calibrated tightening stance intact. However, SLR will be gradually decreased from 19.5% to 18% @25 bps (0.25%) per quarter for the next 6 quarters to increase liquidity for lending in banks.


The following comments appeared in last week's technical update on the daily bar chart pattern of Nifty: "If FIIs continue to buy, expect the 'gap' to be completely filled. The down move may resume even if the 'gap' gets filled."

On Thu. Nov 29, the index opened with a small upward 'gap' and rose to completely fill the downward 'GAP' of 89 points (formed on Oct 4) on the back of net buying by FIIs and DIIs.

On Mon. Dec 3, the index touched an intra-day high of 10941, but dropped to test support from the downward 'GAP' before closing at 10884. On the next two days, FIIs and DIIs turned net sellers. The index dropped below the 'GAP' intra-day, touching an intra-day low of 10748, but bounced up to close inside the 'GAP' today.

The index closed above its three EMAs in bull territory. So, did the index just pullback towards its 200 day EMA prior to resuming its up move? Or, has it resumed its corrective down move that started on Aug 29? 

Note that all three EMAs have converged together (marked by gray circle). A sharp move is likely to follow. Will it be upwards or downwards? 

Odds favour a down move. Why? Because, the index managed only a day's (Dec 3) close barely above 10882, which is the 50% Fibonacci retracement level of the 1756 points fall from the Aug 28 top to the Oct 26 low. Many a retracement has been observed to flounder at, or near, the 50% level. 

Daily technical indicators are in bullish zones, but turning bearish. MACD is above its signal line but its upward momentum has stalled. RSI and Slow stochastic have formed 'rounding top' reversal patterns. Slow stochastic is showing negative divergence by touching a lower top.

Nifty's TTM P/E is at 26.09, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone - not giving any near-term directional indication.

The US-China trade war has not been resolved - only postponed for 3 months. The S&P 500 index had a huge fall on Dec 4. FIIs are unlikely to turn bulls if the US market continues to correct. 

RBI's cautious stance - despite moderating CPI inflation - was apparently not liked by the Indian market. Expect bears to drive home their advantage till state election results are announced on Dec 11.

A test - and a possible breach - of the Oct 26 low may be on the cards. Small investors waiting to enter may get better entry points if they wait a little longer.

Tuesday, December 4, 2018

Gold and Silver charts: bears still on top

Gold chart pattern


The daily bar chart pattern of Gold has re-entered and closed inside the 'Support/Resistance zone' between 1230 & 1240 (refer previous post), and may make an attempt to test resistance from its falling 200 day EMA.

Strong trading volumes during recent down days reveal that bears are very much on top. Expect bears to put up a fight to defend the long-term moving average and prevent gold's price from entering bull territory. 

Daily technical indicators are looking bullish. MACD has crossed above its '0' line to enter bullish zone. RSI is rising above its 50% level. Slow stochastic has entered its overbought zone.

Some near-term upside is likely. Gold's price needs to move convincingly above its 200 day EMA and the 1280 level for bulls to regain control of the chart.

On longer term weekly chart (not shown), gold’s price closed above its 20 week EMA, but below its 50 week and 200 week EMAs in long-term bear territoryWeekly technical indicators are turning bullish. MACD is rising above its signal line in bearish zone. RSI looks poised to cross above its 50% level. Slow stochastic is moving up in bullish zone after falling from its overbought zone.

Silver chart pattern


The daily bar chart pattern of Silver managed to close just above its 50 day EMA with good volume support, but remains well below its falling 200 day EMA in a bear market.

Daily technical indicators are turning bullish. MACD has crossed above its signal line in bearish zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone. 

Some more near-term upside is likely. Expect strong resistance from the zone between 15.0 and 15.25.

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

Monday, December 3, 2018

S&P 500 and FTSE 100 charts (Nov 30, 2018): bulls trying to regain control

S&P 500 index chart pattern


The following remark was made in last week's post on the daily bar chart pattern of S&P 500: "...Friday's curtailed trading formed a 'gravestone doji' candlestick pattern, which can lead to a pullback towards the plummeting 20 day EMA."

The expected pullback turned into a sharp rally. The index closed above its three EMAs in bull territory on Fri. Nov 30. Bulls managed to prevent the 'death cross' (of the 50 day EMA below the 200 day EMA) for the time being.

The next hurdle for bulls is the previous (Nov 7) index top of 2815. Bears can be expected to put up some resistance there - as they had done in Oct '18. 

Daily technical indicators are turning bullish. MACD is rising above its signal line in bearish zone. RSI has just crossed above its 50% level. Slow stochastic is rising towards its overbought zone. Some more near-term upside is likely. 

On longer term weekly chart (not shown), the index closed just below its sliding 20 week EMA, but above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are in bearish zones. MACD is falling below its signal line. RSI is facing resistance from its 50% level. Slow stochastic is falling below its 50% level.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 consolidated sideways during the week, and continued to face resistance from its 20 day EMA. However, it appears to be forming a 'rounding bottom' reversal pattern.

Though the index closed below its three EMAs in bear territory, the probable acceptance of the BrExit deal by all parties concerned, plus the fact that US and China have agreed not to escalate their trade war have brought a sea change in market sentiments.

(At the time of writing this post, the index is trading almost 150 points higher, and has moved above its 20 day and 50 day EMAs.)

Daily technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI is above its 50% level. Stochastic has entered its overbought zone. Some near-term upside is likely. 

On longer term weekly chart (not shown), the index closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, but showing upward momentum. MACD has started rising below its signal line. RSI and Stochastic are rising towards their respective 50% levels.