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Saturday, July 29, 2017

Sensex, Nifty charts (Jul 28, 2017): touch new highs as bulls rule

FIIs were net buyers of equity on Tue. & Thu., but net sellers on the other three days of the week. DIIs were net sellers of equity on Tue. & Thu., but net buyers on the other three days.

For the week as a whole, both were net buyers of equity - worth Rs 14.9 Billion and Rs 9 Billion respectively. Sensex gained 0.9% and Nifty gained 1% on weekly closing basis. Both indices touched new highs.

As per RBI, India's foreign exchange reserves rose $2.2 Billion to a record high of $391.3 Billion for the week ended July 21. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex had broken out above an 'ascending triangle' pattern on Jul 10. It consolidated sideways for the next 9 trading sessions while trading above its three rising EMAs in a bull market.

On Mon. Jul 24, the index broke out above the consolidation range with good volume support, and rallied to touch a new high of 32673  on Thu. Jul 27 - meeting the upward target mentioned in an earlier post.

Negative divergences visible on daily ROC, RSI and Slow stochastic indicators led to some profit booking, with the index closing just above 32300. 

Note that Slow stochastic has formed a 'double top' reversal pattern inside its overbought zone. Some more correction or consolidation is possible.

With FIIs and DIIs in 'buy mode', any correction/consolidation is likely to be shallow and of short duration. 

An escalation of the border skirmish with China can be a 'Black Swan' event. So far, India has stood firm against severe provocation. 

Stay invested. Remain cautiously optimistic. This is not the time to dive into the market.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose to touch a new high of 10115 on the back of a sharp increase in volumes - meeting the upward target mentioned in last week's post

The index closed above the 10000 level for the first time ever, and is trading above its two rising weekly EMAs in a bull market. However, overbought technical conditions may trigger some correction or consolidation.

All four weekly technical indicators are inside their respective overbought zones. ROC and Slow stochastic are showing negative divergences by failing to touch new highs with the index. (Note that the weekly indicators have remained overbought for the past 6 months.)

Nifty's TTM P/E has increased to 25.56 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is deep inside its overbought zone.

Bottomline? Sensex and Nifty charts touched new highs - meeting their respective upward targets following breakouts above 'ascending triangle' patterns. Both FIIs and DIIs were net buyers. Index levels climbed despite technically overbought conditions. Stay invested. 

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