Wednesday, June 17, 2015

Nifty chart: a mid-week update (Jun 17 ‘15)

FIIs are still in sell mode. As per provisional figures, their net sales in equity crossed Rs 2000 Crores during the first three days of the current week. DIIs more than compensated by net buying equity worth Rs 2700 Crores.

Monsoon rains have been above average so far, despite a late start. WPI inflation was –2.36% in May ‘15. Current account deficit contracted to a 3 months low in May ‘15. But exports are down for the 6th month in a row.

The government has consented to 16 FDI proposals worth Rs 6750 Crores recently. A gradual shift towards FDI will have a longer lasting effect on trade deficit than the present dependence on volatile FII flows.

"Manufacturers in the United States and around the world are eager to invest in India, but first, we need Prime Minister Modi to enact serious policy reforms that level the playing field for all, and encourage and protect collaboration and innovation," said Jay Timmons, President and CEO, US National Association of Manufacturers at a recent meeting in Washington.

Nifty_Jun1715

Even after 4 straight sessions of gains, the daily bar chart pattern of Nifty has spent 11 consecutive trading sessions below its 200 day EMA. The 20 day EMA has crossed below the 200 day EMA, and is providing resistance to the current rally.

The 50 day EMA is falling towards the 200 day EMA. The ‘death cross’ below the long-term moving average will technically confirm a bear market. The rally needs to gather strength to prevent the ‘death cross’.

Daily technical indicators have corrected oversold conditions, but remain bearish. MACD has moved up to touch its falling signal line in negative zone, and showing positive divergence by touching a higher bottom. ROC has crossed above its 10 day MA and is ready to enter positive zone. RSI has emerged from its oversold zone. Slow stochastic is trying to follow suit.

The blue down trend line is dominating the Nifty chart – as it has done since the beginning of Mar ‘15. Bears will remain in control as long as the index stays below the trend line. 

Volumes picked up a bit today, but much more needs to be done by bulls if the rally is to sustain longer. Without FII buying support, that seems unlikely to happen.

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