Wednesday, August 30, 2017

Nifty chart: a midweek technical update (Aug 30 ‘17)

FIIs were net sellers of equity worth Rs 16 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 21.6 Billion.

Nifty made a couple of futile attempts to breach the (purple) down trend line on Mon. & Wed. (Aug 28 & 30). On Tue. Aug 29, it dropped to seek support from its 50 day EMA.

GST collection for the month of Jul '17 was Rs 922 Billion - exceeding the government's target of Rs 910 Billion - despite only 3.8 million of the 5.8 million GST registered entities paying up so far.

RBI has drawn up a second list of 40 bank loan defaulters against whom proceedings may be initiated under the Insolvency and Bankruptcy code. The cleaning up process of the NPA problem in the banking system continues.

The daily bar chart pattern of Nifty had corrected below its 20 day and 50 day EMAs to the 'support-resistance' level of 9700 on Aug 11.

Since then, the index has been consolidating sideways - alternatively moving above its 20 day EMA and falling below its 50 day EMA.

The entire trading for the month has occurred below the (purple) down trend line and the 9700 level - forming a 'descending triangle' like pattern.

A breakout above the down trend line will negate the 'descending triangle', but may not give bulls the upper hand because the 10000 level is likely to provide strong resistance. (The technical reason for the resistance at 10000 was explained in an earlier post.) 

A fall below 9700 may lead to a fall towards 9300, and a test of support from the rising 200 day EMA. Note that the index is trading well above its 200 day EMA in a bull market. 

Technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is in bearish zone - moving sideways below its falling signal line. RSI and Slow stochastic are facing resistances from their respective 50% levels.

Nifty's TTM P/E is at 25.54 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is in neutral zone. The index can continue to consolidate for a while - may be till Q2 (Sep '17) results of India Inc. show earnings improvement.

North Korea's regular missile launches - undoubtedly at the behest of China, which is its closest ally - has kept FIIs in 'risk-off' mode. Unless they resume buying, Nifty is not going to move much higher.

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