Wednesday, January 20, 2016

Nifty chart: a midweek update (Jan 20 ‘16)

FII selling continued unabated this week. Their net selling in equities totalled almost Rs 3400 Crores, as per provisional figures. Interestingly, DIIs were net buyers of equity worth Rs 3900 Crores, but could not prevent Nifty from falling to a 19 months low.

Merchandise exports dropped for the 13th straight month, falling nearly 15% YoY in Dec '15 to $22.3 Billion. Imports fell by only 3.9% to $34 Billion.

For the Apr-Dec '15 period, trade deficit was lower at $99.2 Billion against $111.7 Billion in the same period in 2014, thanks mainly to lower import cost of oil.

The long-term closing chart pattern of Nifty 50 has completed a bearish 'rounding top' pattern by falling convincingly below the support level of 7550. The 'rounding top' is clearly visible on the 200 day EMA.

It may be a good time to take a relook at the blog post on Jan 6 where possible lower support levels were mentioned. 

The important level to watch is 7120 (which is the 50% Fibonacci retracement level of the entire rise of 3672 points from the Aug '13 closing low of 5285 to the Mar '15 top of 8957). 

The current level of the 200 week EMA (not shown) is 7085. A convincing breach of that level may mark the end of the long-term bull market.

All three daily technical indicators are looking oversold. The TRIN breadth indicator is approaching extremely oversold conditions. 

Nifty looks ripe for a technical bounce. But continued FII selling can negate technicals.

Caution should be the watchword. Next week has F&O expiry and Republic Day holiday. Better to stay away for now and let the dust settle.

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