Wednesday, April 20, 2016

Nifty chart: a midweek update (Apr 20 '16)

WPI inflation in Mar '16 was -0.85% against -0.91% in Feb '16. It was the 17th straight month of deflation, thanks to lower fuel prices. Exports were down 5.5% in Mar '16 - falling for the 16th month in a row.

Q4 (Mar '16) results have started hitting the market. TCS, Infosys, Wipro and LIC Housing Finance have declared decent sets of numbers. Already experts are talking about increase in earnings of India Inc. from Q4 onwards.

In the two trading days this week, FIIs were net buyers of equity worth nearly Rs 900 Crores. DIIs were net sellers of equity worth more than Rs 600 Crores. Nifty has risen 1100 points from its Feb 29 low. 

The 1 year closing chart pattern of Nifty shows the important role played by the 'support-resistance' level of 7550. 

After facing resistance from its 200 day EMA, the index dropped below its rising 20 day EMA but received good support from 7550 and the rising 50 day EMA.

The subsequent sharp rally - on the back of strong FII buying - propelled the index with an upward 'gap' (not shown) above its 200 day EMA into bull territory after 6 months.

An upward breakout with a 'gap' is considered to be technically 'stronger' than an ordinary breakout without a 'gap'. The 200 day EMA is likely to turn into a strong support level.

The next 'support-resistance' level of 7950 has now come into play. The index opened today's trading exactly at 7950, but slipped down to close flat.

Daily technical indicators are in bullish zones, but looking overbought. Upward momentum of RSI has stalled. MACD and ROC (not shown) are showing negative divergences by failing to move higher with the index.

A pullback towards the 200 day EMA is a possibility if FIIs remain in profit-booking mode - as they were today.

Any dip towards 7800 will be an opportunity to add.

Track Q4 (Mar '16) results closely to identify companies that are performing consistently.

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