Saturday, July 30, 2016

BSE Sensex and NSE Nifty charts (Jul 29, 2016): bulls outmanoeuver bears

FIIs were net buyers of equity during Jul '16. Their net buying for the month totalled Rs 10,100 Crores, which exceeded their combined net buying during Apr-Jun '16. DIIs were net sellers of equity worth Rs 6050 Crores, as per provisional figures.

Sensex gained 3.9% and Nifty gained 4.2% for the month. The gains may seem small. But in absolute numbers, Sensex gained 1052 points and Nifty gained 350 points over 20 trading sessions.

Q1 (Jun '16) results have more or less been as per expectations, with a handful of positive surprises. The GST bill is going to be placed in the Rajya Sabha for approval after the government and opposition came to an understanding.

After two years of near drought, monsoon is wreaking havoc across the country. Deforestation and unplanned urbanisation due to lack of environmental awareness is undoing India's economic and technical progress. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex continued its sideways consolidation with a slight upward bias inside the long-term 'support-resistance' zone (marked by blue dotted lines) between 27600 and 28600.

All three EMAs are rising and the index is trading above them in a bull market. The index touched an 11 months high of 28240 on Jul 28. However, the rally from the BrExit low of 25911 - touched on Jun 24 '16 - is looking a bit 'tired'.

All four technical indicators are showing negative divergences by failing to touch new highs with the index (marked by small arrows). The index looks poised for a correction. FIIs may buy the dip and prevent a big fall.

If you are sitting on profits, it may be a good idea to take some of it off the table. Alternatively, keep a trailing stop-loss and continue to enjoy the bull ride.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty has now spent 10 weeks inside a 'rising wedge' pattern. The expected breakout from the pattern is downwards.

The index is facing resistance from the long-term resistance level of 8650. Rising volume bars indicate that there is no dearth of buying support - mainly from FIIs.

All four weekly technical indicators are looking overbought. That doesn't mean Nifty can't move even higher. An index can remain overbought for long periods during bull rallies.

The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone - hinting at some more upside for the index.

Stay invested, but avoid fresh buying unless you find compelling value in individual stocks. 

Bottomline? Sensex and Nifty charts show that bulls are continuing to outmanoeuver bears. Index valuations on a TTM basis are looking expensive. Passing of the GST bill and RBI policy announcement next week may be triggers for bulls to make an attempt to test lifetime highs.


Subhankar said...

Comment from satvinder Pal Singh:

Sir I am holding Tata Steel which is now at avg. cost., bought small lot of Ultratech cement is in 25% profit now but bought for holding 2-3 Years. coal India still in loss. and few others in very small qty. like Bhel, idfcbank etc. Is it fine to book now (I am not willing to sell atleast Tatasteel, Ultratech & Coal India rest have negligible investment)

Subhankar said...

@satvinder: Sorry, I accidentally deleted your original comment.

You can hold on to Tata Steel and Ultratech. I don't much care for PSU stocks - so you are on your own about Coal India and Bhel. Re: Idfc Bank - there are many better banks available.

A simple question to ask yourself about any stock: Will I buy it at current price and current market conditions? If the answer is 'Yes' then hold; if the answer is 'No' then sell.