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Wednesday, December 16, 2015

Nifty chart: a midweek update (Dec 16 ‘15)

As the calendar year 2015 draws to a close, selling by FIIs is tapering down. Their net selling in equity just about crossed Rs 600 Crores during the first three days of trading this week, as per provisional figures.

DIIs continued their bullish stance, and were net buyers of equity worth nearly Rs 1700 Crores. That helped Nifty to jump up to its falling 20 day EMA.

The macroeconomic outlook remains weak. WPI inflation crept up, but remained negative. CPI moved above 5% - thanks to higher food prices.

Exports fell 24% in Nov '15 - its 12th straight month of degrowth. Imports fell more than 30%, which reduced the trade deficit for the Apr-Nov '15 period to $87.5 Billion from $102.5 Billion in the same period in 2014.

The daily bar chart pattern of Nifty bounced up smartly after testing its Sep '15 low of 7540, but is facing resistance from its falling 20 day EMA.

Has the index formed a 'double bottom' reversal pattern - ending the 9 months long down trend? It's too soon to call. Why? Because a 'double bottom' needs technical confirmation - which will require the index to cross above its Oct '15 top of 8336.

That means the index needs to overcome resistances from its 3 falling EMAs, and climb almost 600 points from its current level. Not impossible, but bears may make it a difficult task.

That's the bad news. The good news is that all three technical indicators have also formed 'double bottom' patterns, which is a bullish sign.

MACD is about to cross above its signal line in negative zone. RSI bounced up after receiving support from the edge of its oversold zone. Slow stochastic has emerged strongly from its oversold zone.

The long-term bull market remains intact. The 200 week EMA (not shown on chart) is still rising, and Nifty is trading almost 700 points above it. However, weekly technical indicators aren't showing any upward momentum.

Identify fundamentally strong stocks, and accumulate them gradually.

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