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Wednesday, December 9, 2015

Nifty chart: a midweek update (Dec 09 ‘15)

FIIs remain bearish on emerging markets. Their net selling in equities during this week crossed Rs 1100 Crores, as per provisional figures. For the first 7 trading days in Dec ‘15, their net selling has exceeded Rs 3500 Crores.

DIIs have been bullish. Their net buying in equities this week was Rs 1400 Crores, but failed to prevent Nifty from seeking lower levels. Their net buying in Dec ‘15 so far has been Rs 3100 Crores.

Why are FIIs on such a selling spree? Several reasons can be attributed. Appreciation of the US Dollar against the Rupee; likely interest rate hike in the US later this month; withdrawal of sovereign Middle East funds because of falling oil prices.

Nifty_Dec0915

The daily bar chart pattern of Nifty closed lower for the 6th day in a row, after facing strong resistance from its falling 50 day EMA.

All three EMAs are falling, and the index is trading below them in a bear market. The Sep 8 low of 7540 is in danger of being tested, and even breached.

The blue down trend line continues to dominate Nifty’s chart.

Daily technical indicators are in bearish zones, but only Slow stochastic has entered its oversold zone. Some more correction is possible.

Note that three of the four indicators – MACD, ROC, RSI – are showing positive divergences by touching higher lows (marked by blue arrows).

A technical bounce can occur at any time. Will that lead to a reversal of the 9 months long down trend soon? Doesn’t seem so.

FII selling negated the ‘inverse head and shoulders’ reversal pattern that formed during Aug-Sep ‘15. There is no indication of a bottom formation as yet.

The long-term bull market is intact. The 200 week EMA (not shown on chart) is still rising, and Nifty is trading more than 550 points above it.

Many small investors have shown maturity – as evidenced by the steady inflows into mutual funds.

Many good mid-cap and small-cap stocks are facing selling pressure. This may be a good time to utilise your stock picking skills.

1 comment:

Unknown said...

7540 will be breached, no doubt about it. But what needs to be seen is whether price will just shakeout and come back up that level or will go much below.

In my view the mid caps are in a bubble zone and this anomaly needs to be corrected. And this could occur either as earning picking up in the next quarter result or a crash of midcap segment.