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Wednesday, November 4, 2015

Nifty chart: a mid-week update (Nov 04 ‘15)

Q2 (Sep ‘15) results declared so far have seen more misses than hits. Top line growth of Indian companies have been disappointing. Lower commodity prices and belt tightening has led to some bottom line growth.

Market sentiments and Nifty levels are reflecting the disappointment. As per provisional figures, FIIs were net sellers of equity worth Rs 690 Crores during the first three trading days in Nov ‘15. DIIs were net buyers of equity worth Rs 420 Crores.

4-wheeler and 2-wheeler sales picked up considerably in Oct ‘15 despite a higher base (both Dussehra and Diwali were celebrated in Oct ‘14). That gives hope of good auto sales in Nov ‘15. Lower interest rates played a part in boosting sales.

Nifty_Nov0415

The daily closing chart pattern of Nifty appears to have lost its way after breaking out above the neckline (marked NL) of an ‘inverse head and shoulders’ reversal pattern.

The index rallied above its three EMAs and briefly entered bull territory, but failed to overcome twin resistances from the 8335 level (marked by dotted horizontal line) and the blue down trend line that has dominated Nifty’s chart for the past 8 months.

The index has fallen below its three EMAs, and may fall further. The neckline (NL) can provide some support to the index. Will the support be strong enough to withstand the bearish sentiment?

Results – or, the exit polls – of the Bihar election will provide the answer.

Daily technical indicators are looking bearish. MACD is falling below its signal line, and looks ready to enter negative zone. ROC is negative and falling below its 10 day MA. RSI has dropped below its 50% level. Slow stochastic has dropped inside its overbought zone.

Note that RSI and Slow stochastic are showing positive divergence by moving up slightly.

Keep your ‘buy list’ ready in case the NDA can pull off a victory in the Bihar elections. That can set-off a brief pre-Diwali rally.

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