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Wednesday, July 18, 2018

Nifty chart: a midweek technical update (Jul 18, 2018)

FIIs were net sellers of equity during the first two trading days this week, but net buyers today. Their total net selling was worth Rs 12 Billion. DIIs were net sellers on Mon. Jul 16 but net buyers on the next two days. Their total net buying was worth Rs 7.7 Billion, as per provisional figures.

India's WPI inflation touched 5.8% in Jun '18, compared with 4.4% in May '18 and an upwardly revised 3.6% in Apr '18. It was the highest level touched by WPI since Dec '13 (5.9%). Higher crude oil, cotton, vegetable prices and electricity tariffs were the main culprits.

In a classic case of 'sell on news', HUL stock dropped by more than 100 points after announcing good Q1 (Jun '18) results. Good numbers were also declared by Federal Bank, Bandhan Bank, ICICI Lombard, Zee Entertainment. Jindal Stainless, Cyient, Hindustan Media Ventures, GM Breweries came out with disappointing numbers.


In last week's technical update on the daily bar chart pattern of Nifty, a few technical reasons were cited to warn bulls. The index subsequently crossed above 11050 on intra-day basis three occasions, but failed to close above 11025.

The 'resistance zone' between 10950 and 11120 is being used by bears to make a last stand. The index is trading well above its three rising EMAs and the (purple) up trend line in a bull market. So, expect the index to cross above the 'resistance zone' to a new lifetime high sooner than later.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways above its signal line. RSI is moving sideways above its 50% level. Slow stochastic is about to fall from its overbought zone. 

Nifty's TTM P/E has moved up to 27.28 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some index consolidation or correction.

Oil's price has moderated a bit. But rising inflation may force RBI to raise interest rates during its Aug '18 monetary policy meeting. Manufacturing activity is not showing any significant uptick. The macroeconomic environment is not conducive to growth.

Investors should be cautiously optimistic and remain stock and sector specific in their buying, because the rally from the Mar '18 low has not been broad-based. 

(Note: Thinking of buying quality mid-cap and small-cap stocks but not sure which ones to pick? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for three more days only - till Jul 21, 2018. Contact me at mobugobu@yahoo.com for details.)

Tuesday, July 17, 2018

WTI and Brent Crude Oil charts: bears fight back as supply worries ease

WTI Crude Oil chart


The following comments were made in the previous post on the daily bar chart pattern of WTI Crude Oil: "The speculative nature of oil's price rise last week is visible on the sliding volume bars and the sharp price rise above the three daily EMAs. Such sudden price spikes are unsustainable."

Oil's price formed a 'diamond' reversal pattern that tends to mark a price top - from which a sharp downward breakout occurred on Wed. Jul 11. After a brief upward bounce from the 50 day EMA, oil's price had another sharp fall towards the 'support-resistance zone' (between 66 and 67).

Daily technical indicators have corrected overbought conditions, and are showing downward momentum. MACD is falling below its signal line in bullish zone. RSI and Slow stochastic are falling below their respective 50% levels. 

The rising 200 day EMA suggests that the bull market is alive. However, some more correction is likely.

Evidence is mounting that Saudi Arabia is heeding US President Donald Trump's call for OPEC to keep the oil market amply supplied and rein in prices.

On longer term weekly chart (not shown), oil's price received support from its 20 week EMA, and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators have corrected overbought conditions, and are showing downward momentum in bullish zones. Some more correction is possible.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil had formed a small 'double top' reversal pattern in May '18, followed by a correction within a 'flag' pattern. An upward breakout from the 'flag' in Jun '18 was followed by the formation of a second 'double top' reversal pattern.

A sharp downward breakout occurred from the second 'double top' on Wed. Jul 11, which dropped oil's price to the 73 level. A brief upward bounce faced resistance from the 50 day EMA. 

Another sharp fall towards the 'support-resistance zone' (between 70 and 71.30) on Mon. Jul 16 has put bulls on the back foot. However, oil's price continues to trade above its rising 200 day EMA in a bull market.

Daily technical indicators are in bearish zones, and showing downward momentum. Slow stochastic is seeking support from the edge of its oversold zone, and can trigger a technical bounce.

On longer term weekly chart (not shown), oil's price closed below its 20 week EMA, but above its 50 week and 200 week EMAs in long-term bull territory. Weekly technical indicators are turning bearish. MACD is falling below its signal line in bullish zone. RSI and Slow stochastic are seeking support from their respective 50% levels.

Monday, July 16, 2018

S&P 500 and FTSE 100 charts (Jul 13, 2018): bulls wresting control but bears still resisting

S&P 500 index chart pattern


The following remarks were made in last week's post on the daily bar chart pattern of S&P 500: "A convincing breakout above the 'triangle' and a move above the 2800 level will put bulls back on track to regain control of the chart. Bears will try to make their progress as difficult as possible."

The index broke out above the down trend line of the large 'symmetrical triangle' on Mon. Jul 9, but without a significant increase in volumes that would have technically validated the breakout.

Though the index rose higher on Tue. Jul 10, it failed to reach the 2800 level. A pullback to the down trend line on Wed. Jul 11 was followed by an upward bounce that just about managed to close above 2800.

Daily technical indicators are in bullish zones. MACD is rising above its signal line. RSI and Slow stochastic are moving sideways. All three are showing negative divergences by failing to rise higher with the index.

Some consolidation or correction is possible. The index is trading above its three rising EMAs in a bull market. A convincing move above 2800 is likely to face resistance from the 'downward gap' formed back in Jan '18.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing negative divergences by not rising higher with the index.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 had touched a lifetime high of 7903.50 on May 22 '18. Since then, it had been trading within a downward sloping channel (also called a 'flag').

By not dropping to the lower edge of the 'flag', the index was expected to breakout above the 'flag'. It did so on Mon. Jul 9, only to pull back inside the 'flag' on Wed. Jul 11 - where it received support from its 50 day EMA.

The subsequent upward bounce was again not accompanied by a surge in volumes (not shown) that would have technically validated the upward breakout. (At the time of writing this post, the index has pulled back to the top of the 'flag'.)

What had looked like a bullish 'flag' pattern is now beginning to look more like a 'saucer' or a 'cup and handle' pattern. Both patterns - if they get formed - have bullish implications. The index is trading above its three EMAs in a bull market.

Daily technical indicators are looking neutral to bullish. MACD and RSI are moving sideways in neutral zones. Slow stochastic is in bullish zone, but not showing much upward momentum.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are showing downward momentum in bullish zones.

Sunday, July 15, 2018

Sensex, Nifty charts (Jul 13, 2018): bulls overcome bear resistance

FIIs were net sellers of equity on four out of five trading days last week. Their total net selling was worth Rs 18 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth Rs 22.9 Billion, as per provisional figures.

In twin setbacks for India's economy, CPI inflation increased to 5% in Jun '18 from 4.87% in May '18 while IIP moderated to a 7 months low of 3.2% in May '18 from 4.7% in Apr '18.

India's trade deficit widened to a 5 year high of US $16.6 Billion in Jun '18 from US $14.6 Billion in May '18 due to a surge in oil prices and a weaker Rupee against the US Dollar. 

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex shows that bulls have successfully overcome the resistance of bears - thanks to sustained buying by DIIs. The down trend line that dominated the chart for more than 5 months has been comprehensively breached.

The index touched a new lifetime high of 36740 on Fri. Jul 13, but closed a shade lower to form a small 'reversal day' bar that can lead to a pullback towards the breached down trend line. That may be an opportunity for entry for those who missed buying on the break out.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone; RSI has entered its overbought zone. Both are showing negative divergences by failing to touch new highs with the index. ROC and Slow stochastic have started to move down inside their respective overbought zones.

Sensex is trading well above its three rising EMAs in a bull market. However, just a handful of index stocks have been mainly responsible for the rally from the Mar '18 low. The broader market - particularly mid-cap and small-cap stocks - have not participated in the rally so far.

That can change if Q1 (Jun '18) results of India Inc. start to show earnings improvement. Stock picking skills will get tested at a market top. It is better to err on the side of caution. Use the SIP approach. Avoid impulsive buying in bulk. 

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty finally breached the down trend line that had dominated the chart for the previous 23 weeks. Note that the surge in volumes that technically validates an upward breakout was missing. A pullback towards the trend line is a possibility.

The index is trading well above its two rising weekly EMAs in a bull market. Any pullback towards the trend line can be a buying opportunity.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC is about to cross above its 10 week MA and enter its overbought zone. RSI and Slow stochastic are moving sideways inside their respective overbought zones, and showing negative divergences by failing to rise higher with the index.

Nifty's TTM P/E has moved up to 27.38 - which is well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) has dropped towards its overbought zone, hinting at some correction or consolidation.

Bottomline? Bulls have overcome four straight weeks of strong bear resistance by triggering a break out above down trend lines on Sensex and Nifty chartsSome  consolidation or correction will improve the technical 'health' of the charts. No need to feel euphoric yet, as only a few large-cap stocks have been responsible for the rallies from the lows of Mar '18.

(NoteThere 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 Newsletter today. A limited number of new subscriptions are being offered till Jul. 21, 2018. Contact me for details: mobugobu@yahoo.com.) 

Thursday, July 12, 2018

5 Stocks contributed Half of Nifty's 1000 point Rally from its Mar '18 low

"Nifty 50 has gained more than 1,000 points from its previous low in March, with the benchmark index taking 76 sessions to chart the journey.
The 50-stock gauge beat small- and mid-cap indices on returns but lagged the Nifty Bank Index during the period. It’s now trading close to its all-time high that the index scaled in January before it started retreating.
The market rallied on the back of short-covering and buying in selective stocks while mid caps underperformed during the period..."
Read more at:

Wednesday, July 11, 2018

Nifty chart: a midweek technical update (Jul 11, 2018)

FIIs were net sellers of equity during the first two trading days this week, but net buyers today. Their total net buying was worth Rs 0.5 Billion. DIIs were net buyers on all three days. Their total net buying was worth Rs 10.5 Billion, as per provisional figures.

The GST Council may consider reduction in tax rates on several goods and services with low revenue implications as part of the tax rationalisation exercise in its next meeting on July 21.

Q1 (Jun '18) results season of India Inc. has started with a bang. TCS reported better than expected numbers. IndusInd Bank turned out another solid quarter. Prakash Ind. announced spectacular triple-digit growth in net profit.  



After being thwarted by bears a few times, the daily bar chart pattern of Nifty finally broke out above the (purple) down trend line that had dominated the chart for more than 5 months.

All three EMAs are rising, and the index is trading above them in a bull market. Time for bulls to start celebrating? Yes, but with a less vigorous approach. Why?

There are a few technical reasons: 
1) volumes (not shown) accompanying the breakout on Mon. Jun 9 were moderate - not sufficiently strong to technically validate the breakout; 2) the index has moved a bit far above its 20 day EMA, which is a sign of an overbought condition; 3) negative divergences visible on MACD and RSI, which touched lower tops than their May '18 tops, while the index has moved higher; 4) today's trading has formed a 'doji' candlestick that may be part of a bearish 'evening star' pattern (which will get confirmed only if tomorrow's trading forms a bear candle).

As often happens after a breakout, a pullback towards the down trend line can be expected. Can the pullback cause the index to drop below the down trend line? The possibility can't be ruled out at this stage.

Daily technical indicators are bullish, and looking overbought. MACD has crossed above its signal line, and rising towards overbought zone. RSI is also rising towards its overbought zone, but its upward momentum has reduced. Slow stochastic is well inside its overbought zone, and can trigger a pullback towards the down trend line.

Nifty's TTM P/E has moved up to 27.2 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, and may limit near-term index up side.

Trump has announced more tariff's on Chinese imports. FIIs are fleeing Asian emerging markets. Oil's price remains high, and can go higher. Rupee is tumbling against the US Dollar, and RBI is forced to sell Dollars to prevent a Rupee free fall. Inflation is rising, and interest rates will follow. Lots of IPOs are in the pipeline. 

The macro environment is not conducive for a sustained bull rally. Stay invested, but don't feel euphoric about this week's Nifty breakout.

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Tuesday, July 10, 2018

Gold and Silver charts: bears tighten their hold

Gold chart pattern


The following comments were made in the previous post on the daily bar chart pattern of Gold: "Daily technical indicators are looking oversold. But don't expect a strong fight back by bulls. Any attempt at a pullback will provide another selling opportunity."

Bears used every rise to sell. Gold's price dropped to an intra-day low of 1237 on Jul 3, but formed a 'reversal day' bar (lower low, higher close) with good volume support.

Oversold technical indicators triggered a pullback rally that is facing resistance from the falling 20 day EMA. A dip in the US Dollar index also helped bullish cause.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. Expect resistance from 1280 if the rally continues further.

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. MACD is falling below its signal line. RSI is moving sideways. Slow stochastic is trying to recover from its oversold zone. 

Silver chart pattern


The following comments were made in the previous post on the daily bar chart pattern of Silver: "On Thu. Jun 21, silver's price dropped to seek support from the 'Support zone' (between 16.10 and 16.20), only to bounce up - as it has done several times during the past 5 months. How much longer can the 'Support zone' hold?"

Bears answered the question emphatically. Silver's price dropped to the next 'support zone' (between 15.60 and 15.80), only to pullback above 16.20 - where it faced resistance from its falling 20 day EMA.

All three EMAs are falling, and silver's price is trading below them in a bear market. Expect bears to sell on every rise.

Daily technical indicators are in bearish zones. Only Slow stochastic is showing upward momentum.

On longer term weekly chart (not shown), silver’s price closed below its three sliding weekly EMAs in a long-term bear marketWeekly technical indicators are in bearish zones. Slow stochastic has slipped inside its oversold zone.