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Wednesday, March 18, 2015

Nifty chart: a mid-week update (Mar 18 ‘15)

WPI Inflation for Feb ‘15 was a lower-than-expected –2.06% compared with –0.39% in Jan ‘15 and 5% in Feb ‘14. Lower oil price was the main contributor to lower inflation. But food inflation, which has greater weightage in CPI inflation, remains a concern. Heavy unseasonal rain damaged standing crops in Punjab, UP and Maharashtra.

The telecom spectrum auction has raised more than Rs 1 Lakh Crore so far – which is good news for India’s fiscal deficit but bad news for telecom operators. The government is taking a re-look at a few coal blocks that fetched low prices in the recent auction to ensure that no cartelisation has taken place.

Both FIIs and DIIs have been net sellers of equity this week. Their combined net selling crossing the Rs 1900 Crores mark as per provisional figures. Though Nifty managed to hold its ground, it is in an intermediate down trend since touching its all-time high of 9119 on Mar 4.

Nifty_Mar1815

The daily bar chart pattern of Nifty dropped briefly inside the support zone between 8180 and 8630 (marked by blue dotted lines on chart) and bounced up. But the index is facing resistance from its falling 20 day EMA.

Does that mean the index can correct some more? Strong volumes on recent down days is an indication that some amount of ‘distribution’ is taking place. That is to be expected near an all-time high.

Daily technical indicators are looking bearish. MACD is falling below its signal line, and entered negative zone. ROC is below its 10 day MA, and falling in negative territory. RSI is facing resistance from its 50% level. Slow stochastic is inside its oversold zone.

The index has corrected only about 5.5% from its Mar 4 ‘15 top. Some more correction is quite possible. It seems like the index is consolidating and just waiting for some external trigger to move up again.

As long as the 200 day EMA keeps rising, and Nifty keeps trading above it, the long-term bull market will be under no threat. Use the opportunity to make a list of fundamentally strong stocks that have corrected disproportionately. Add them when the up move resumes.

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