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Wednesday, June 14, 2017

Nifty chart: a midweek technical update (Jun 14 ‘17)

FIIs have turned net sellers of equity again. Their total net selling during the first three days of the trading week was worth Rs 6.4 Billion. DIIs were net buyers of equity worth Rs 3.1 Billion, as per provisional figures. Nifty has corrected about 1.3% from its Jun 6 top of 9709.

India's CPI inflation dipped to a record low of 2.18% in May '17 against 2.99% in Apr '17, mainly due to lower food prices. RBI will now be under pressure to reduce the repo and reverse repo rates.

The IIP number for Apr '17 slipped to 3.1% against the revised figure of 3.75% for Mar '17. The manufacturing sector, which constitutes more than 77% of the index, grew only 2.6% in Apr '17 against 5.4% in Apr '16.


The following comments were made in the previous mid-week update on the daily bar chart pattern of Nifty

"The rally from the Dec 26 '16 low features several corrective moves towards the rising 20 day EMA that has kept the chart technically 'healthy'. Another correction towards the 20 day EMA will provide Nifty the technical strength to move convincingly above 9700."

Nifty's corrective move from the Jun 6 top of 9709 is now testing support from the 20 day EMA. Will the support hold - as it has done for the past 6 months?

There is no reason why not. Despite FII selling this week, the index has managed to cling on to the 9600 level on a closing basis.

However, if FIIs continue with their selling, a fall towards 9500 can't be ruled out. The index is trading above its three EMAs in a bull market. The dip is providing an adding opportunity.

Daily technical indicators are in bullish zones, but looking a bit bearish. MACD has formed a 'rounding top' reversal pattern and crossed below its signal line in bullish zone. RSI is moving sideways in bullish zone after falling from its overbought zone. Slow stochastic has fallen sharply from its overbought zone.

Nifty's TTM P/E has slipped a little to 24.29, still much above its long-term average. The breadth indicator NSE TRIN (not shown) has nose-dived into its overbought zone - limiting index upside.

Stay invested, and continue with planned SIPs. Avoid any impulsive buying near a market top.

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