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Sunday, June 4, 2017

Sensex, Nifty charts (Jun 02, 2017): rising higher in 'blue sky' territory

FIIs were net sellers of equity worth Rs 4.54 Billion during the week - but they were net buyers worth more than Rs 10 Billion on Wed. May 31. 

As per provisional figures, DIIs were net buyers of equity worth Rs 1.12 Billion for the week - but they were net sellers worth worth more than Rs 9 billion on Wed. May 31.

Both Sensex and Nifty touched new highs - gaining 0.8% and 0.6% respectively on a weekly closing basis. 

Passenger vehicle sales grew about 9% in May '17 against 14.7% in Apr '17. Maruti, Tata Motors, Ford and Honda sales grew in double digits. M&M, Hyundai and Renault sales grew in low single digits. Toyota had negative growth.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex had closed for the first time above the 31000 level on Fri. May 26. It failed to make much progress, closing within a 50 points range during the first four days of the week.

On Fri. Jun 2, the index crossed the 31300 level intra-day and closed at a new high of 31273. All three EMAs are rising, and the index has closed above them in a bull market.

The up trend from the Dec '16 low is intact, as the index continues to trade above 'fan line 3' (after breaching 'fan lines' 1 & 2).

Daily technical indicators are looking overbought. Three of them - ROC, RSI, Slow stochastic - continue to show negative divergences by failing to touch new highs with the index.

Sensex can remain overbought for long periods during a bull market. However, a correction may be just around the corner. The index is trading 2750 points above its 200 day EMA, which is an indication of extremely overbought condition as per empirical observation.

Stay invested, but with a trailing stop-loss. Try to avoid any impulsive buying. 

NSE Nifty index chart pattern

For the sixth week in a row, the weekly bar chart pattern of Nifty touched a new high, and closed above 9650 for the first time in its history.

The index is trading well above its two rising weekly EMAs in 'blue sky' territory (i.e. with no known resistances).

Weekly technical indicators are inside their respective overbought zones. But three of them - ROC, RSI, Slow stochastic - continue to show negative divergences by failing to touch new highs with the index.

Nifty's TTM P/E is at 24.43 - slightly higher than last week, and well above its long-term average. However, the breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - hinting at more index upside.

Bottomline? Bulls are in complete control of Sensex and Nifty charts, which are touching new highs every week. Both indices look overbought. Corporate earnings may take another couple of quarters before catching up with index valuations. Stay invested but maintain a trailing stop-loss. 

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