Sunday, September 17, 2017

Sensex, Nifty charts (Sep 15, 2017): bulls trying to regain control

FIIs were net sellers of equity worth Rs 33.6 Billion for the week. DIIs were net buyers of equity worth Rs 38.3 Billion, as per provisional figures. Sensex gained 1.8% and Nifty gained 1.5% on weekly closing basis.

WPI inflation rose to a 4 month high of 3.24% in Aug '17, against 1.88% in Jul '17 and 1.09% in Aug '16 as prices of vegetables soared.

India's exports grew 10.29% while imports grew 21% in Aug '17. The trade deficit widened to $11.64 Billion against $7.7 Billion in Aug '16 - mainly due to higher oil and gold imports. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex gained nearly 600 points for the week as bulls tried to regain control of the chart. The index is trading above its three rising EMAs in a bull market.

The 20 day EMA and the MACD signal line are forming bullish 'saucer' patterns, but bears have not been routed yet. 

Sensex is more than 400 points below its lifetime high of 32686 (touched on Aug 2). After breaking out above a bearish 'rising wedge' pattern (refer last week's post), the index is consolidating within a bearish 'flag' pattern.

Daily technical indicators are in bullish zones, but sending conflicting signals. MACD is rising above its signal line. ROC has dropped to seek support from its 10 day MA. RSI is retreating after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways inside overbought zone.

Some more consolidation within the 'flag' and a breakout below it are possibilities. Note that FIIs were net buyers of equity on Fri. Sep 15. If they continue buying, the scales will tip towards bulls.

Stay invested. Remain cautiously optimistic.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty moved above the 'rising wedge' pattern formed during the previous 4 weeks, but faced resistance from the lifetime high level of 10138 (touched in the week ending on Aug 4 '17).

The past 7 weeks' trading appears to have formed an 'ascending triangle' pattern from which the likely break out is upwards.

Note that the index is in the process of forming either a continuation or a reversal pattern. Just as a bearish 'rising wedge' turned into a bullish 'ascending triangle', the pattern may further evolve to form a 'rectangle' or a 'broadening top' pattern.

The index is trading above its two rising weekly EMAs in a bull market. Bulls will regain control only after a convincing move above the lifetime high of 10138. That hasn't occurred yet. 

Weekly technical indicators are looking overbought. MACD is moving sideways below its signal line inside overbought zone. ROC  has merged with its 10 week MA and moving sideways below its overbought zone. RSI is rising towards its overbought zone. Slow stochastic is about to enter its overbought zone.

Nifty's TTM P/E is now at 26.24 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating near the edge of its overbought zone and can limit index upside. 

Bottomline? Sensex and Nifty charts have been consolidating sideways with upward biases for the past 5 weeks. DII buying seems to have negated the 
earlier bearishness. FIIs are still selling. Inflation and the trade deficit are rising. The low Jul '17 IIP number shows that manufacturing growth remains muted. So, caution is advised.

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