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Sunday, July 9, 2017

Sensex, Nifty charts (Jul 07, 2017): forming bullish ascending triangle patterns?

FIIs were net sellers of equity worth Rs 19.5 Billion during the week. DIIs were net buyers of equity worth Rs 23.6 Billion, as per provisional figures.

Sensex and Nifty gained 1.4% and 1.5% respectively on a weekly closing basis, and are within handshaking distances of their lifetime highs.

Concerns regarding GST implementation are gradually dissipating. Over the medium to long-term, market share is expected to shift away from unorganised players (mainly micro, small and medium enterprises) to organised sectors.  

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows the effect of a week of strong buying by DIIs. 

The index bounced up after receiving good support from its 50 day EMA, and rose to touch an intra-day high of 31461 (just 0.2% lower than its Jun 22 top) and a lifetime closing high of 31369 on Thu. Jul 6 

By touching a higher bottom of 30681 on Jun 30, the index may be in the process of forming an 'ascending triangle' pattern, from which the likely breakout is upwards.

Daily technical indicators are in bullish zones, but only Slow stochastic is showing any upward momentum. All four are showing negative divergences (marked by blue arrows).

Some more consolidation within the 'triangle' is possible before the index eventually breaks out.

Remember that an upward breakout will be technically valid if accompanied by a volume surge. Without volume support, the likely breakout may be followed by a pullback towards the top of the 'triangle'.

Stay invested. Await Q1 (Jun '17) results to decide the next course of action.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose to test resistance from the 9700 level before closing just 2 points lower than its lifetime closing high of 9668 (in the week ending on Jun 9). 

For the past 7 weeks, the index has been consolidating sideways - forming a possible 'ascending triangle' pattern from which the likely breakout is upwards.

Weekly technical indicators are in bullish zones and looking overbought. Three of them are showing negative divergences (marked by blue arrows) by failing to touch higher bottoms with the index.

Nifty's TTM P/E has moved up to 24.6 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped back inside its overbought zone after briefly emerging from it.

Some more consolidation around current levels is a possibility before the index can break out.

Bottomline? Sensex and Nifty charts are consolidating sideways near lifetime highs. Some more consolidation is likely. Stay invested. Await Q1 (Jun '17) results - to be announced from next week onwards. 

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