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Wednesday, July 15, 2015

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

CPI inflation touched a 9 months high of 5.4% in Jun ‘15 - thanks to higher food prices. In May ‘15, CPI number was at 5.01%. In Jun ‘14, it was much higher at 6.77%.

WPI inflation remained flat at –2.4%, but the rising CPI number justified RBI Governor’s hawkish stance on not reducing interest rates further.

Narendra Modi’s ‘Make in India’ clarion call is beginning to show some traction. Mahindra group has signed a deal with AirBus for jointly manufacturing military helicopters. Tata group has signed an agreement with Boeing for jointly manufacturing drones and other products.

As per provisional figures till Jul 14 ‘15, FIIs have been net buyers of equity worth Rs 900 Crores, while DIIs have been net sellers of equity worth Rs 870 Crores. Nifty has broken out of its 4 months long down trend, and is consolidating before moving higher.


The following comment appeared in last week’s post on the daily bar chart pattern of Nifty: “Some more correction, and a drop below the trend line, may be on the cards but bulls can be expected to fight back soon.”

Nifty pulled back to the down trend line, but bounced up after receiving good support – providing an entry opportunity to those who did not (or could not) buy during the earlier break out above the down trend line.

All three EMAs are rising again, and Nifty is trading above them. Bulls are regaining control, but still have some work to do. The index is consolidating within the ‘support-resistance zone’ between 8180 and 8630. A convincing move above 8630 will restore full control to bulls.

Three of the four daily technical indicators are turning bullish again. MACD has started moving up after touching its signal line in positive zone. RSI has bounced up from its 50% level. Slow stochastic is climbing towards its overbought zone. Only ROC is looking bearish by sliding below its falling 10 day MA in positive zone.

Higher volumes on recent down days indicate that bears are still active – and may continue to remain so during Q1 (Jun ‘15) results season.

International concerns have been taken in its stride by Nifty. Some reports suggest a slowdown in monsoon progress across certain parts of the country.

Price fluctuations are part and parcel of the stock market environment. Be cautious, but not afraid.

Increasing the lot size of derivative contracts from Rs 2 Lakh to Rs 5 Lakh is a good move by SEBI. It should deter small investors from burning their hands in F&O trading.

Nifty may be in the midst of forming a bullish cup-and-handle pattern, which can take another 2-3 months to complete. If the pattern does play out (and there is no certainty that it will), the index will have a minimum upward target of 10300 by the end of this year.

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