Wednesday, July 5, 2017

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

FIIs were net sellers of equity worth Rs 14.1 Billion during the first three days of trading this week, despite being net buyers today.

DIIs were net buyers of equity worth Rs 13.3 Billion, as per provisional figures. Nifty recovered 200 points from last Friday's low of 9449, but is facing a bit of resistance from the 9650 level.

The Nikkei India Manufacturing PMI slipped to 50.9 in June '17, from 51.6 in May '17 and 52.5 in Apr '17. Though a figure above 50 indicates growth, the slide in the PMI number is a matter of concern.

The daily bar chart pattern of Nifty briefly dropped below its 50 day EMA to touch an intra-day low of 9449 on Jun 30, its lowest level in 5 weeks.

The index bounced up to close higher - forming a 'reversal day' bar (lower low, higher close). That allowed bulls to stage a recovery.

Strong buying by DIIs on Mon. Jul 3 propelled the index above its 20 day EMA and the 9600 level. A convincing move above the Jun 6 top of 9709 will put bulls firmly back in the saddle.

Daily technical indicators are looking bullish, and showing some upward momentum. MACD is still below its falling signal line in bullish zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.

Nifty's TTM P/E has moved up to 24.53 - well above its long-term average. The breadth indicator NSE TRIN has corrected extreme overbought condition, but remains at the edge of its overbought zone.

GST implementation will be a game-changer for India's economic growth in the long-term. Initial teething problems and confusion among small traders may keep growth on the slow lane in the interim.

Nifty may be forming an 'ascending triangle' pattern from which the likely breakout is upwards. Some more consolidation within the 'triangle' is likely before the index can rise to a new high. 

A sharp rally is unlikely as long as FIIs remain sellers. Stay invested. Buy only if you find value.

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