Wednesday, September 20, 2017

Nifty chart: a midweek technical update (Sep 20 ‘17)

FIIs were net sellers of equity worth Rs 30 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 16.4 Billion, as per provisional figures. Nifty touched a new closing high of 10153 on Mon. Sep 18 and a new intra-day high of 10179 on Tue. Sep 19.

After the fiasco of demonetisation, GST implementation is turning out to be another thorn in the flesh for the NDA government. The balloon of July's tax collection of Rs 950 Billion was punctured by input tax credit claims of Rs 650 Billion.

Tata Steel has announced a 50-50 joint venture in Europe with Thyssenkrupp. The JV is expected to absorb a large portion of Tata Steel Europe's debt (which was used to acquire Corus 9 years ago).


The daily bar chart pattern of Nifty touched a new high of 10179 on Sep 19, but formed a 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Despite strong selling by FIIs, large inflows into domestic mutual funds and the consequent buying by DIIs propelled the index to a new high. The index is trading well above its three rising EMAs in a bull market.

Daily technical indicators are in bullish zones. But caution is advised because MACD and RSI are showing negative divergences by touching lower tops while the index rose higher. Some correction or consolidation may follow.

The entire 7 weeks' trading from Aug '17 onward has formed a large 'rising wedge' pattern, which has bearish implications. Bulls are struggling to move the index above its Aug 2 top of 10138 in a convincing manner.

Nifty's TTM P/E is at 26.39 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is hovering just above its overbought zone, and can limit index upside.

Small investors may be feeling confused about what to do. Confusion comes from lack of a plan for long-term investing. As has been repeated ad nauseam in this blog, your asset allocation plan should decide what needs to be done regardless of the state of the market.

A bull market is supposed to climb a wall of worries. If you are tired of waiting for a correction and can't stop the urge to jump in to the market, select your stocks very carefully, and use a strict 'stop-loss' every time you buy a stock.

1 comment:

Subhankar said...

German Election Shaken Up by Thyssenkrupp-Tata Deal

https://www.bloomberg.com/news/articles/2017-09-20/germany-election-campaign-shaken-up-by-thyssenkrupp-tata-deal