Wednesday, April 5, 2017

Nifty chart: a midweek technical update (Apr 05 ‘17)

FIIs were net buyers of equity worth Rs 8.74 Billion during the two days of trading this week. DIIs were net sellers of equity worth Rs 1.61 Billion, as per provisional figures.

Nifty crossed above the psychological barrier of 9200, its previous (Mar 17) top of 9218, and rose to touch new intra-day and closing highs.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to a 5 months high of 52.5 in Mar '17, from 50.7 in Feb '17. A figure above 50 indicates expansion.

The RBI Governor is likely to keep interest rates unchanged in the policy meeting tomorrow in a continued effort to contain inflation.

The daily bar chart pattern of Nifty has resumed its up move after partly filling the upward 'gap' that formed on the chart on Mar 14 (refer last week's post). The index is trading well above its three rising EMAs in a bull market.

Daily technical indicators are looking bullish. However, RSI and Slow stochastic have re-entered their overbought zones. All three indicators are showing negative divergences by failing to touch new highs with the index. 

Nifty formed a 'dragonfly doji' candlestick pattern today, which is a sign of indecision. Also, the distance between the index and its 200 day EMA has increased to 740 points - making the chart technically susceptible to a correction.

Nifty's TTM P/E remains above its long-term average at 23.49. The breadth indicator NSE TRIN (not shown) is turning down near the upper edge of its neutral zone - hinting at some more upside.

A stronger Rupee against the US Dollar and reasonably stable oil prices is attracting FII inflows, which is helping the index to move higher.

Some one holding long positions from lower levels can continue to hold, but with a trailing stop-loss. Partial profit booking may also be a good idea. Any corrections can then be used to add. New entrants can enter in SIP mode. 

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