Wednesday, July 1, 2015

Nifty chart: a mid-week update (Jul 01 ‘15)

FIIs were net sellers of equity for the second month in a row. Their net selling in Jun ‘15 touched Rs 8200 Crores – the highest net selling during a month since Jun ‘13.

DIIs more than compensated by net buying of equity worth Rs 12000 Crores. That may explain the 500 points rally from the Jun 12 ‘15 low of 7940, which has taken the index above the blue down trend line.

After failing to meet IMF’s debt repayment deadline of Jun 30 ‘15 and threatening to leave the Euro zone, Greece’s leaders toned down their rhetoric and agreed to a bailout offer that turned global stock markets bullish.

The monsoon delivered surplus rains during June, but has weakened during the last couple of days – raising the spectre of deficient rains during Jul ‘15.

Auto companies like Maruti, Hyundai and Tata Motors showed marginal growth in sales during Jun ‘15, but sales of M&M and Toyota slipped. Two-wheeler sales were higher except for HeroMoto, which had flat sales.

Nifty_Jul0115

The daily bar chart pattern of Nifty briefly crossed above the blue down trend line on Thu. Jun 25 ‘15, with decent volume support, but failed to attract follow-up buying from bulls.

The sovereign debt concerns of Greece led to a sharp drop of the index below its three EMAs - to the lower edge of the ‘support-resistance zone’ during Monday’s trading.

Bulls used the opportunity to buy. The index has crossed above its three EMAs and the down trend line to close today at its highest level since May 22 ‘15.

The index has formed a bullish pattern of ‘higher tops and higher bottoms’ after touching its Jun ‘15 low of 7940.

However, daily technical indicators are again looking overbought. Some consolidation can be expected before the index can gather the necessary momentum to cross above the ‘support-resistance zone’.

Note that Nifty has formed an ‘inverse head and shoulders’ pattern with a downward sloping neck line. Since the pattern has formed at the end of a down trend, it is most probably a ‘bottom reversal’ pattern.

The downward sloping neck line has been breached in today’s trading. Since there was no significant rise in volumes - which would have technically validated the breach - bears may engineer a pullback to the down trend line.

Stay invested, or use any dips to add to existing portfolios.

No comments: