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Sunday, June 11, 2017

Sensex, Nifty charts (Jun 09, 2017): pause after touching new highs again

FIIs and DIIs were net buyers of equity during the week, as per provisional figures. FII net buying was worth Rs 6 Billion, which included net selling worth Rs 1 Billion on Fri. Jun 9. DII net buying was worth Rs 8.8 Billion.

Both indices closed flat for the week. The Sensex closed marginally lower. Nifty closed slightly higher. On weekly charts, 'doji' candlestick patterns got formed, which indicate indecision among bulls and bears.

According to RBI, India's forex reserves surged by $2.4 Billion to reach a life-time high of $381.2 Billion in the week ending June 2 on account of rise in foreign currency assets. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched a new high of 31430 on Tue. Jun 6, but formed a 'reversal day' bar (higher high, lower close) that triggered a corrective move towards 'fan line 3'.

It is important that the index receives support from 'fan line 3' if the correction continues. In case 'fan line 3' is breached, a deeper correction towards 30000 may ensue.

Daily technical indicators are in the process of correcting overbought conditions. MACD has formed a 'rounding top' reversal pattern and is about to cross below its signal line. 

ROC has crossed below its 10 day MA and is falling rapidly towards its neutral zone. RSI and Slow stochastic have dropped to the edge of their respective overbought zones.

All three EMAs are rising, and Sensex is trading above them in a bull market. The correction will improve the technical 'health' of the chart, enabling it to rise higher.

A further dip can be used to add to existing positions. Stay invested.

NSE Nifty index chart pattern

For the 7th week in a row, the weekly bar chart pattern of Nifty touched a new high (9709) but closed just 15 points higher on a weekly closing basis - forming a 'doji' candlestick pattern that has the potential of reversing the up trend.

The two weekly EMAs are rising, and the index is trading well above them in a bull market. However, lower volumes during the week indicate bulls are getting a bit weary.

Weekly technical indicators are looking overbought - as they have done for almost 4 months. ROC and RSI are showing negative divergences by failing to touch new highs with the index.

Nifty's TTM P/E is at 24.38 - slightly lower than last week but much higher than its long-term average. The breadth indicator NSE TRIN has dropped sharply from its oversold zone - hinting at some more upside.

Bottomline? Sensex and Nifty charts touched new highs again. Both indices may consolidate or correct a bit before resuming their up moves. Foreign investors are pouring money into emerging market bond funds, as per Wall Street Journal. Stay invested, but maintain a trailing stop-loss.

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