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Wednesday, November 13, 2013

Nifty chart: a mid-week update (Nov 13, ‘13)

Seven straight down-days on the Nifty chart, and the prophets of doom and gloom have started emerging again. Already levels of 5700 and 5500 are being mentioned.

One die-hard bear went so far as to call the rally during Aug and Sep ‘13 as a bear market rally! When was the last time a bear market rally touched an all-time high?!

Economic data seems to be aiding and abetting the bearishness. The IIP number at 2% was nearly half of the consensus estimate. CPI inflation edged into double digits – thanks to rise in food prices.

Is Nifty ready to fall more? Or, is it likely to turn around soon?

Nifty_Nov1313

The answer is ‘Yes’ to both those questions. Note the negative divergences in all four technical indicators, which dropped to lower bottoms while Nifty touched a higher bottom (marked by blue arrows). That means the correction isn’t over yet.

However, three of the four indicators – ROC, RSI, Slow stochastic – are beginning to look oversold. That may lead to a bounce back soon. How soon? Perhaps after a test of support from the 200 day EMA.

Can the Nifty fall even lower? It doesn’t appear so – specially with big boys like TISCO and M&M declaring good Q2 results in a slow economy. The Rupee also recovered after its recent fall.

There was profit booking across Asian markets. India was no exception. Renewed fear of US Fed tapering its bond buying programme is the probable cause of nervousness in the market.

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