Saturday, August 8, 2020

Sensex, Nifty charts (Aug 07, 2020): bulls and bears reach a stalemate

FIIs were net sellers of equity on Wed. Aug. 5, but were net buyers on the other four trading days. Their total net buying was worth a huge Rs 94.97 Billion - thanks to Bandhan Bank owner holding divestment on Mon. Aug 3. DIIs were net sellers of equity on all five trading days. Their total net selling was worth Rs 21.34 Billion.

The IHS Markit India Manufacturing PMI dropped to 46 in Jul '20 from 47.2 in Jun '20. (A reading below 50 indicates contraction.) It was the fourth straight month of contraction. The Services PMI was 34.2 in Jul '20 against 33.7 in Jun '20. The Composite (Mfg. + Serv.) PMI slipped to 37.2 in Jul '20 from 37.8 in Jun '20.

India's Consumer Confidence index plummeted to 53.8 in Jul '20, well below the 100 mark that represents the dividing line between optimism and pessimism. Inflation expectations of households are rising, which may be one of the reasons why RBI maintained status quo on interest rates at its Aug '20 MPC meeting.

BSE Sensex index chart pattern

Despite strong buying by FIIs, the daily bar chart pattern of Sensex failed to move above the 640 points downward 'gap' formed back on Mar 6th. Bears are putting up a strong last-ditch resistance.

On Mon. Aug 3, the index dropped to close below its 20 day EMA for the first time in more than two months. Bulls used the dip to buy - as they have been doing for more than four months.

The index closed just below the 'gap' on Tue. and Wed. (Aug 4 and 5), but entered and remained within the 'gap' during the next two days. The 50 day EMA is on the verge of crossing above the 200 day EMA - the 'golden cross' will technically confirm a return to a bull market.

Daily technical indicators are looking bullish to neutral. MACD is moving sideways below its signal line in bullish zone. ROC is below its 10 day MA, and moving sideways along its '0' line. RSI is falling towards its 50% level. Slow stochastic has bounced up a bit after falling towards its 50% level.

The (blue) up trend line - currently at 37000 - remains intact and untested for the past two months. Any breach of the trend line may be followed by a drop to the 200 day EMA (currently at 36050).

Sensex needs to convincingly move above its Jul. 29th top of 38617 for the bullish pattern of 'higher tops, higher bottoms' to continue. That should not be a problem if FIIs continue their buying.

After touching 103 in mid-March '20, the US Dollar index had been declining steadily, but has bounced up a little after finding a bottom at 92.5. A fall in the Dollar index may be partly responsible for FII flows into emerging markets. The flows can reverse if the Dollar index starts rising.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the fifth straight week, but failed to move above the 'support-resistance' zone between 11000-11250. Bear resistance forced a third weekly close inside the 'support-resistance' zone.

The 20 week and 50 week EMAs are moving up
 after forming bullish 'rounding bottom' patterns. Bulls have the upper hand. However, failure of the index to move above the 'support-resistance' zone has kept the door open for a correction down to the 200 week EMA (at 10282).

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and has entered bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways well inside its overbought zone


Nifty's TTM P/E has moved up to 30.72, a new lifetime high and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone, hinting at some more consolidation or 
correction.
 
Bottomline? Counter-trend rallies on Sensex and Nifty charts have stalled at resistance zones after re-entering bull territories. Bulls have the advantage, but bears are trying their best to hold them back. Stay invested, but avoid fresh buying.

Saturday, August 1, 2020

Sensex, Nifty charts (Jul 31, 2020): a temporary pause or a trend reversal?

FIIs were net buyers of equity on Tue. and Thu. (Jul. 28 and 30), but were net sellers on the other three trading days. Their total net selling was worth Rs 13.11 Billion. DIIs were net buyers of equity on Fri. Jul. 31, but were net sellers on the first four trading days. Their total net selling was worth Rs 24.45 Billion.

During Jul. '20, FIIs were net buyers of equity worth Rs 24.9 Billion - thanks to their strong buying during the week of Jul. 20-24. It was their third straight month of net buying. DIIs were net sellers of equity worth Rs 100.08 Billion during Jul. '20. It was their heaviest monthly selling since Mar. '19.

The index of eight core sector industries contracted 15% in Jun '20, compared with 22% in May '20 and 37% in Apr '20. During Q1 (Apr-Jun '20), the index contracted 24.6%. Only fertilisers showed 4% growth. The other seven (coal, crude oil, natural gas, refinery products, steel, cement, electricity) contracted between 6 to 34%.

Gross tax revenue shortfall of 32.6% during Q1 (Apr-Jun '20) widened India's fiscal deficit to Rs 6.62 Trillion, which is 83.2% of the Rs 7.96 Trillion budget estimate for FY 2020-21. This is the highest fiscal deficit in percentage terms since Q1 (Apr-Jun 1998)

BSE Sensex index chart pattern


An interesting tussle between bulls and bears is evident on the daily bar chart pattern of Sensex. Despite buying pressure from FIIs, bears continued their last-ditch resistance at the 640 points downward 'gap' formed back on Mar 6th.

On Tue. Jul. 28, the index closed above the 'gap' zone. However, formation of a 'reversal day' bar (higher high, lower close) on Wed. Jul. 29 provided a psychological boost to bears. The index corrected during the rest of the week, and closed just below the 'gap'.

What next? Technically, the balance remains tilted towards bulls. The index is trading above its three daily EMAs in bull territory. The up trend line - drawn through Mar '20 and May '20 lows - remains intact. The 50 day EMA is poised to cross above the 200 day EMA - the 'golden cross' will technically confirm a return to a bull market.

Bears are not out of the game yet. As per 'gap' theory, part or complete filling of a 'gap' is usually followed by a resumption of the trend prior to formation of the 'gap'. That means the down trend that started from Wed. Jul. 29 can continue.

On the downside, the wide range between 35700 (level of 50 day EMA) and 37200 (level of 20 day EMA) can provide good support. However, a convincing breach of the up trend line (at 36500) will confirm a trend reversal.

Daily technical indicators are in bullish zones, but starting to show downward momentum. MACD is moving sideways but has slipped below its signal line. ROC has crossed below its 10 day MA. RSI and Slow stochastic have dropped down from their respective overbought zones.

There is no rush to buy the dip. It is possible that the index will test support from the up trend line. Add if the index bounces up from trend line support. Book profits if the trend line gets breached.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the fourth straight week, but formed a weekly 'reversal' bar (higher high, lower close) that stalled the upward momentum of the rally from its Mar '20 low.

The index moved above the 'support-resistance' zone between 11000-11250 intra-week, but failed to sustain above 11250. Bear resistance forced a second weekly close inside the 'support-resistance' zone.

The 20 week EMA has 
crossed above the 200 week EMA after forming a bullish 'rounding bottom' pattern. The 50 week EMA is in the process of forming a 'rounding bottom' pattern. So, bulls have no reason to panic just yet. However, a test of support from the 200 week EMA (at 10273) may be on the cards.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and has entered bullish zone. RSI is above its 50% level. Slow stochastic is well inside its overbought zone


Nifty's TTM P/E has moved up to 30.2, a new lifetime high and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone, hinting at more consolidation or 
correction.
 
Bottomline? Counter-trend rallies on Sensex and Nifty charts have expectedly stalled at resistance zones after re-entering bull territories. The current dip may not be a buying opportunity. Sometimes, staying on the sidelines can be a good strategy.

Saturday, July 25, 2020

Sensex, Nifty charts (Jul 24, 2020): relying too much on Reliance?

FIIs turned bulls, and were net buyers of equity on all five trading days. Their total net buying was worth Rs 77.92 Billion. DIIs were net sellers on all five trading days, but couldn't keep pace with FII buying. Their total net selling was worth Rs 53.23 Billion. 

Sensex gained almost 3% while Nifty gained nearly 2.7% on the back of strong buying by FIIs, who seem to have taken a particular fancy for RIL despite poor Q4 performance. A slew of international investment announcements into Jio platforms has made the company 'net debt free'. 

A basket of penny stocks valued under Rs 5 - typically targeted by small retail investors - has outperformed the Sensex by a country mile. That is always a worrying sign for bulls.

BSE Sensex index chart pattern


The following comment was made in last week's post on the daily bar chart pattern of Sensex: "On the upside, resistance can be expected from a 640 points downward 'gap' formed on Mar 6th."

The index closed higher on Mon. Jul 20th, but formed a small 'doji' pattern that hinted at indecision among bulls and bears. An upward 'gap' opening on Tue. Jul 21 belied bearish hopes. The index entered and closed inside the 640 points downward 'gap' formed on Mar 6th.

For the next three days, Sensex consolidated sideways and closed within the 'gap' - nearly filling it, but failed to overcome last-ditch resistance put up by bears. 

Daily technical indicators are in bullish zones. MACD is moving sideways after merging with its signal line. ROC is also moving sideways after merging with its 10 day MA. RSI is seeking support from the edge of its overbought zone. Slow stochastic is moving sideways inside overbought zone.

The up trend line - drawn through Mar '20 and May '20 lows - remains intact. A 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market. That seems a formality, now that FIIs have turned bulls.

If you have been waiting for a proper correction to enter, you may need to wait a little longer. If you were fortunate to enter the ongoing rally at lower levels, stay invested but maintain a trailing stop-loss to protect profits.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the third week in a row, and above the 11000 level for the first time since Mar 5 '20. Note the following comment from last week's post:

"On the upside, the 'support-resistance' zone between 11000-11250 can provide bullied bears a last opportunity to put up some resistance." The index tested the 11250 level during the week, and closed below 11200 inside the 'support-resistance' zone.

The 20 week EMA has
crossed above the 200 week EMA after forming a bullish 'rounding bottom' pattern. The 50 week EMA is in the process of forming a 'rounding bottom' pattern.

Weekly technical indicators are looking bullish. MACD is rising above its signal line and is poised to enter bullish zone. RSI is gradually rising above its 50% level. Slow stochastic is moving sideways well inside its overbought zone


Nifty's TTM P/E has moved up to 29.35, a lifetime high and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has started rising in neutral zone, and can trigger some more consolidation or
correction.
 
Bottomline? Ongoing rallies on Sensex and Nifty charts have stalled at resistance zones after re-entering bull territories. The rallies appear overly dependent on a single stock - RIL. It's a little late to jump into the bull bandwagon. Stay on the sidelines, but maintain trailing stop-losses to protect profits.

Saturday, July 18, 2020

Sensex, Nifty charts (Jul 17, 2020): bears getting bullied by Reliance bulls

FIIs were net buyers of equity on Mon. and Fri. (Jul 13 and 17), but were net sellers on the other three days. Their total net selling was worth Rs 19.59 Billion. DIIs were net buyers on Thu. Jul 16, but were net sellers on the rest four days. Their total net selling was worth Rs 15.84 Billion. 

Sensex and Nifty each gained about 1.2% for the week. Like in the previous week, the indices gained while FIIs and DIIs were both net sellers. Small investors who may have entered the market recently should learn the concept of a stop-loss - otherwise their 'paper' profits can vanish in a hurry.

India's usual trade deficit turned into a surplus in Jun '20 for the first time since Jan '02. Exports contracted 12.4% to US $21.9 Billion; imports contracted 47.6% to $21.1 Billion - leaving a surplus of about $800 Million. The sharp drop in imports indicates a slump in domestic demand.

BSE Sensex index chart pattern



For the second week in a row, the daily bar chart pattern of Sensex spent the entire trading week above its three daily EMAs in bull territory. On Tue. Jul 14, the index broke out below the 'rising wedge' pattern, only to pullback along the lower trend line of the 'wedge' during the rest of the week.

Note that the larger up trend line - drawn through the Mar '20 and May '20 lows remains intact. Only a downward breach of this trend line can bring bears back into the game. On the upside, resistance can be expected from a 640 points downward 'gap' formed on Mar 6th.

Daily technical indicators are in bullish zones. MACD is moving sideways after merging with its signal line. ROC is trying to cross above its 10 day MA. RSI has re-entered its overbought zone. Slow stochastic is about to follow suit.

All four indicators are showing negative divergences by failing to rise higher with the index, which closed at its highest level in 4 months. The index has rallied almost 11500 points (45%) from its Mar 24th low, even as the country is being ravaged by a pandemic. 

The disconnect between a bullish market that has gained mainly on the back of a single stock (RIL), and the grim reality of an economy falling into a recession is staggering. It will take a long time for the economy to recover and corporate earnings to get back on track.   


NSE Nifty index chart pattern




The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the second straight week, and above the 10900 level for the first time in 4 months. Two gaps got filled in the process - the downward 'gap' of week ending Mar 13th, and the upward 'gap' formed last week.

The 20 week EMA has formed a bullish 'rounding bottom' pattern and is poised to cross above the 200 week EMA. On the upside, the 'support-resistance' zone between 11000-11250 can provide bullied bears a last opportunity to put up some resistance.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line in bearish zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI is slowly rising above its 50% level. Slow stochastic is moving sideways well inside its overbought zone


Nifty's TTM P/E has moved up to 28.55, its highest level for the month and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is hovering in neutral zone, and may limit near-term index upside.

 
Bottomline? Ongoing rallies on Sensex and Nifty charts have overcome important resistance levels and re-entered bull territories. There are clear signs of 'distribution' from strong to weaker hands. Caution is advised.

Saturday, July 11, 2020

Sensex, Nifty charts (Jul 10, 2020): bulls looking tired after long rallies

FIIs were net buyers of equity on Mon., Tue. and Thu. (Jul 6, 7 and 9), but were net sellers on the other two days. Their total net selling was worth Rs 6.35 Billion. DIIs were net buyers on Mon., but were net sellers on the next four days. Their total net selling was worth Rs 26.09 Billion. 

Sensex and Nifty each gained 1.5% for the week even as FIIs and DIIs were both net sellers. So, who were the buyers? It was you and me - a sign of 'distribution' by the big boys.

India's IIP (Index of Industrial Production) contracted 34.7% in May '20 - an improvement over 57.6% contraction in Apr '20, reflecting gradual resumption of manufacturing activity.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex spent the entire trading week above its three daily EMAs in bull territory for the first time since Jan '20. However, all may not be well, as the past five weeks of trading has formed a bearish 'rising wedge' pattern. A downward breakout from such a pattern is more likely. 

Daily technical indicators are in bullish zones, but beginning to show downward momentum. MACD is sliding towards its signal line. ROC is about to cross below its 10 day MA. RSI looks poised to slip down from its overbought zone. Slow stochastic has started to move down inside its overbought zone.

All four indicators showed negative divergences by failing to rise higher with the index. A flood of short-term liquidity triggered an index rally of more than 40% from its Mar 24th low. The risk on the upside is increasing. 


There appears to be some thaw in the frozen border relations with China - a country notorious for its 'two steps forward, one step back' approach to its border relations with 14 different countries. Agreeing to form 'buffer zones' inside Indian territory - as per reports - is equivalent to falling prey to China's nefarious designs.

The Covid 19 virus continues to flourish - particularly in cities - as WHO has acknowledged airborne spread. Some factories that had opened up are facing a spike in new positive cases. Several hundred air travellers have been afflicted.

Q1 (Jun '20) results are expected to be a disaster. With FIIs and DIIs in sell mode, the rally from the Mar '20 low may have run its course. There may not be a sharp crash. A more gradual consolidation-cum-downward slide is likely.

NSE Nifty index chart pattern




The weekly bar chart pattern of Nifty formed a 45 points upward 'gap' to hop above its 50 week EMA, and closed above its three weekly EMAs for the first time since Feb 20th, gaining 160 points (1.5%) on a weekly closing basis. Bulls need to be wary, as the 'gap' can turn out to be an 'exhaustion gap'.

The index has moved 200 points above the 61.8% Fibonacci retracement level of 10550. However, it failed to close above the 76 points downward 'gap' that formed in the week ending on May 13th - though the 'gap' was filled.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside bearish zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI is slowly rising above its 50% level. Slow stochastic is well inside its overbought zone, but its upward momentum has stalled


Nifty's TTM P/E has moved up to 28.27, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone, and can limit near-term index upside.

 
Bottomline? Ongoing rallies on Sensex and Nifty charts have overcome important resistance levels. Short-term liquidity flows gave bulls the upper hand. Now there are signs of 'distribution' from strong to weaker hands. Corrective moves can happen at any time.

Saturday, July 4, 2020

Sensex, Nifty charts (Jul 03, 2020): bulls on the verge of regaining control

For the second straight month, FIIs and DIIs were both net buyers of equity, which explains the strong rallies on Sensex and Nifty charts. However, the net buying reduced considerably - to Rs 54.93 Billion (Jun '20) from Rs 139.14 Billion (May '20) for FIIs; and Rs 24.34 Billion (Jun '20) from Rs 122.93 Billion (May '20) for DIIs. 

India's Manufacturing PMI rose sharply to 47.2 in Jun '20 from 30.8 in May '20. Services PMI improved to 33.7 in Jun '20 from 12.6 in May '20. The Composite (Mfg. + Serv.) PMI rose to 37.8 in Jun '20 from 14.8 in May '20. All the numbers were below 50 - indicating contraction.

Automobile sales were disappointing in Jun '20 on a YoY basis. Maruti, Hyundai, Toyota, M&M showed 50-60% sales decline. Two-wheeler sales declined 25-35%. CV segment remained under extreme stress. Only tractor sales showed growth.

BSE Sensex index chart pattern


The bulls are gradually regaining control of the daily bar chart pattern of Sensex. After completely filling the downward 'gap' formed on Mar 12th, the index has moved above its 200 day EMA and the 61.8% Fibonacci retracement level of 35920 into bull territory.

Bears are on the back foot - thanks to net buying by FIIs and DIIs. But they haven't thrown in the towel yet. Why? Because the index has formed a bearish 'rising wedge' pattern during the past four weeks. The likely breakout from such a pattern is downwards.

Daily technical indicators are in bullish zones, but starting to look overbought. MACD is moving sideways in bullish zone along with its merged signal line. ROC has dropped to seek support from its 10 day MA. RSI and Slow stochastic are rising inside their respective overbought zones.

All four indicators are showing negative divergences by failing to rise higher with the index. Remember that a flood of short-term liquidity can overcome technical headwinds. However, the index has already gained more than 40% from its Mar 24th low. It may be better to err on the side of caution.

A global economic recession is looming ahead. India will not be spared. Periodic announcements - like several investments in Jio and launching of virus vaccines by different companies - have stoked bullish sentiment. That may not be able to sustain the rally much further.

Timely profit booking is a discipline that should be followed by small investors. You only make money when you sell at a profit.

NSE Nifty index chart pattern


For the third week in a row, the weekly bar chart pattern of Nifty closed above its 200 week EMA in long-term bull territory, gaining almost 225 points (2.2%) on a weekly closing basis.

The breach of the 200 week EMA is a bullish sign. The index has closed above an important resistance level - the 61.8% Fibonacci retracement level of 10550. However, the zone (10610-10750) between the 50 week EMA and the 76 points downward 'gap' formed in the week ending on May 13th may provide stronger resistance.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside oversold zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI has moved above its 50% level. Slow stochastic is well inside its overbought zone. Caution is advised as the upside risk is increasing. 

Nifty's TTM P/E has moved up to 27.78, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone. Near-term index upside may be limited.

 
Bottomline? Ongoing rallies on Sensex and Nifty charts are gradually overcoming important resistance levels. Short-term liquidity flows have given bulls the upper hand. Bears are not out of the game. Be prepared for corrective moves at any time.

Saturday, June 27, 2020

Sensex, Nifty charts (Jun 26, 2020): 3 months long rallies losing momentum?

FIIs were net sellers of equity on Thu. and Fri. (Jun 25 and 26) but were net buyers during the first three trading days. Their total net buying was worth Rs 5.56 Billion. DIIs were net buyers of equity on Tue. and Fri. (Jun 23 and 26), but were net sellers during the three other days. Their total net selling was worth Rs 13.1 Billion, as per provisional figures.

According to a report by S&P Global Ratings, India's economy is in deep trouble. Inability to contain the Covid 19 virus, an anaemic policy response, underlying vulnerabilities, particularly in the financial sector can lead to a contraction in GDP growth by 5% during FY 2020-21.  

Despite some of the worst macroeconomic fundamentals in recent memory, millions of new investors with no previous trading history have been piling into Asian stock markets. It is time to remain circumspect.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex consolidated sideways with a slight upward bias, spending four of the five trading sessions inside the downward 'gap' that had formed back in Mar 12th.

On Tue. Jun 23, the index closed above the 'gap' for the first time in more than 3.5 months. Partial or complete filling of a downward 'gap' is usually followed by a resumption of the down trend.

On Wed. Jun 24, the index rose higher to test resistance from the sliding 200 day EMA but dropped back inside the 'gap' - forming a reversal day bar (higher high, lower close) that often marks an intermediate top.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways in bullish zone along with its merged signal line. ROC is moving sideways above its 10 day MA. RSI is moving down towards its 50% level. Slow stochastic has slipped down from its overbought zone. 

The present government has proved quite incapable of either managing the economy or the rapid spread of the Covid 19 virus. Now the China threat along India's border is being mismanaged by resorting to obfuscation and jingoism.

A flush of liquidity helped in boosting three months long rallies in global stock markets. A handful of stocks have led the rally in India, with RIL doing most of the heavy lifting. Any breach of the up trend line from the Mar 24th low can trigger a sharp correction.

NSE Nifty index chart pattern



For the second week in a row, the weekly bar chart pattern of Nifty closed above its 200 week EMA in long-term bull territory, gaining about 138 points (1.35%) on a weekly closing basis.

The breach of the 200 week EMA is a bullish sign. However, there are three overhead resistance levels - the 61.8% Fibonacci retracement level of 10550, the 50 week EMA (at 10610) and the 76 points downward 'gap' formed in the week ending on May 13th. The zone between 10550-10750 may provide strong resistance.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside oversold zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI has just moved above its 50% level. Slow stochastic has entered its overbought zone. Near-term index upside seems limited. 

Nifty's TTM P/E has moved up to 26.67, its highest level for the month and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone. Some near-term index consolidation or correction is possible.

 
Bottomline? Bear market rallies on Sensex and Nifty charts are close to important resistance levels. Short-term liquidity flows may have given the impression that all is well with the economy and the stock market. Both indices look ripe for corrective moves.