Nifty chart: a midweek technical update (Nov 29 ‘17)

FIIs were net sellers of equity worth Rs 12.7 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 4.1 Billion, as per provisional figures.

Nifty lost only 29 points (0.3%), and continues to trade above its three rising EMAs in a bull market.

India's GST collection in Oct '17 fell to Rs 833 Billion from more than Rs 900 Billion in each of the previous three months due to some reduction in rates, refunds given to exporters and credit claimed by businesses.

The following concluding remarks were made in last week's technical update on the daily bar chart pattern of Nifty: "...a convincing move above the Nov 6 top of 10490 is required for bulls to regain complete control of the chart. Bears may try to prevent that from happening soon."

The index touched an intra-day high of 10410 on Tue. Nov 28, but formed a 'reversal day' bar (higher high, lower close) that stalled the previous 8 days' rally.

Daily technical indicators are in bullish zones but showing some signs of correcting. MACD and RSI are showing slight downward momentum. Slow stochastic has entered its overbought zone.

Nifty's TTM P/E is at 26.51 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen to the edge of its overbought zone and can limit index upside.

F&O settlement, forthcoming inflation and GDP numbers may have kept bullish enthusiasm in check. Expect some more consolidation or correction before the index makes an effort to cross above its Nov 6 top of 10490. 

Gold and Silver charts: tussle between bulls and bears remain unresolved

Gold chart pattern

The daily bar chart pattern of Gold shows a sideways consolidation for the past two months - facing resistance from the 'Support/resistance zone' (between 1300 & 1310) and receiving support from the 200 day EMA . However, bulls are trying to gain ground gradually. 

Gold's chart appears to be forming a bullish 'rounding bottom' pattern, which is more clearly visible on the 20 day EMA. Another attempt may be made by bulls to push gold's price above the 'support/resistance zone'. The previous attempt on Oct 16 had failed.

Daily technical indicators have turned bullish. MACD and RSI have just entered bullish zones. Slow stochastic has risen towards its overbought zone, and can limit further upside in gold's price. All three have formed bullish patterns of 'higher tops, higher bottoms' during the past month.

Strong volume bars on recent down days mean bears are not going to yield much further ground without a proper fight.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory.  Weekly MACD and RSI are moving sideways in bullish zones. Slow stochastic has climbed out of its oversold zone, but is showing negative divergence by touching a lower bottom.

Silver chart pattern

For the past 7 weeks, the daily bar chart pattern of Silver has been consolidating sideways within a 'symmetrical triangle' pattern. All three EMAs are moving sideways within the 'triangle'; silver's price is oscillating about the three EMAs.

Daily MACD and RSI are in their neutral zones. Slow stochastic has dropped below its 50% level, but is trying to recover. What will be silver's next move?

That's a good question. A 'triangle' is an unreliable pattern because a breakout can occur either above or below the 'triangle'. There is a third possibility also. Silver's price can continue to meander sideways and move through the apex of the 'triangle'.

[If the latter situation does arise, a horizontal line through the apex of the 'triangle' (at 17) can become a trend deciding level. Above 17 will be bullish; below 17 will be bearish.]

So, one needs to wait for the eventual breakout (or not) to decide whether to buy, sell or hold. Strong volumes on recent down days mean bears may have a slight edge.

On longer term weekly chart (not shown), silver’s price closed just below its 20 week & 50 week EMAs, and well below its sliding 200 week EMA in a long-term bear market. Weekly MACD and RSI are in neutral zones. Slow stochastic is in bearish zone.

S&P 500 and FTSE 100 charts (Nov 24 '17): in long-term bull markets but FTSE showing near-term weakness

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 didn't stay below the (purple) down trend line for very long. On Tue. Nov 21, the index crossed above the trend line with an upward 'gap' that forced bears to retreat once again.

On Fri. Nov 24, the index touched an intra-day high of 2604, and closed above the 2600 level for the first time - gaining 0.9% on a weekly closing basis.

Daily technical indicators are looking bullish. MACD is about to cross above its signal line and re-enter its overbought zone. RSI has bounced up after receiving support from its 50% level, and is moving up towards its overbought zone. Slow stochastic has entered its overbought zone.

Note that all three indicators are showing negative divergences by failing to touch new highs with the index. A pullback towards the down trend line is a possibility.

The index is trading above its three rising EMAs in a bull market, and is climbing a wall of technical worries. That is what bull markets do. 

Profit booking often ensues when an index touches a new high. So, remain circumspect, maintain a trailing stop-loss and enjoy the bull ride.  

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are overbought and can trigger a correction. 

FTSE 100 index chart pattern

The following comment was made in last week's post on the daily bar chart pattern of FTSE 100: "..an oversold Slow stochastic can also trigger a pullback towards the (purple) down trend line."

The index bounced up after receiving support from the 7350 level on Mon. Nov 20. On Wed. Nov 22, the index climbed above its falling 20 day and 50 day EMAs, the (purple) down trend line and the 7460 level intra-day, but faced selling pressure and closed below 7420.

A bearish 'shooting star' candlestick pattern got formed. It triggered a sideways consolidation with a downward bias. The index eked out a 0.4% gain on a weekly closing basis, and remained in bull territory above its 200 day EMA.

Daily technical indicators are looking bearish, and showing slight downward momentum. The (purple) down trend line continues to dominate the chart - as it has done for almost 6 months.

On longer term weekly chart (not shown), the index closed just below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is sliding below its signal line in bullish zone. RSI and Slow stochastic are seeking support from their respective 50% levels.

Sensex, Nifty charts (Nov 24, 2017): bears down but refusing to get counted out

FIIs were net sellers of equity worth Rs 18.7 Billion during the week. DIIs were net buyers of equity worth Rs 29.3 Billion, as per provisional figures. Both Sensex and Nifty gained 1% on a weekly closing basis.

The government has amended the Insolvency & Bankruptcy Code (IBC). Wilful defaulters and entities whose accounts have been classified as NPAs will now be barred from bidding for assets under IBC.

On Fri. Nov 24, global rating agency S&P retained India's sovereign rating at BBB- with a stable outlook. This is the lowest of all investment-grade sovereign ratings. [The possibility that S&P may not follow Moody's in upgrading India's sovereign rating was mentioned in this post.]

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex has resumed its rally and is trading above its three rising EMAs in a bull market. The Nov 7 top of 33866 is within handshaking distance. A new high appears just around the corner.

Bears are trying their level best to make life difficult for bulls. A look at the daily technical indicators will explain why.

MACD is about to cross above its falling signal line in bullish zone, but isn't showing much upward momentum. ROC has crossed above its 10 day MA into bullish zone, but isn't showing much upward momentum either. RSI is meandering along its 50% level. Slow stochastic is about to enter its overbought zone.

Refusal to upgrade India's sovereign rating by S&P may spur FIIs to increase their selling. F&O settlement on Thu. Nov 30 may restrain DII buying. Expect bears to make a last-ditch stand to prevent bulls from regaining complete control.

Continuous domestic liquidity flow into MF accounts is propelling the index higher even though earnings of India Inc. haven't improved much. Index valuation is increasingly looking stretched.

This is not the time to get excited and place huge bets. The time to do that was back in Dec '16. Be circumspect and very choosy about what you buy near a market top. Quality should take precedence over quantity.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty continued to rally after bouncing up from the support level of 10100 in the previous week. The Nov '17 top of 10490 remains a hurdle that needs to be crossed convincingly if bulls are to regain complete control of the chart.

Weekly technical indicators are looking overbought, and showing negative divergences by moving lower when the index moved higher. MACD is about to slip below its signal line. ROC is ready to cross below its 10 week MA. RSI and Slow stochastic are at the edges of their respective overbought zones.

Some consolidation or correction can be expected during F&O expiry week. The index is trading above its three rising EMAs in a bull market. "Buy the dips" tactics can be used to add to existing holdings.

Nifty's TTM P/E has increased to 26.59 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is rising in neutral zone and can limit index upside.

Bottomline? Sensex and Nifty charts have resumed their rallies after bouncing up from important support levels. Bulls are regaining control. Index valuations are looking stretched. Look for opportunities in individual stocks with good fundamentals that are recovering after recent corrections.

Top 5 India ETFs

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Here are the top five India ETFs by year-to-date returns as of November 6, 2017."

1. Direxion Daily MSCI India Bull 3x ETF (INDL)

2. VanEck Vectors India Small-Cap ETF (SCIF)

3. Columbia India Small-Cap ETF (SCIN)

4. iShares MSCI India Small-Cap (SMIN)

5. Columbia India Infrastructure ETF (INXX)

(For expanded chart views, right click on the chart and open in a new tab.)

Read the full article here: 

https://www.investopedia.com/investing/top-india-etfs/

Nifty chart: a midweek technical update (Nov 22 ‘17)

FIIs are back to their bearish ways. Their net selling in equities for the first three days of trading this week was worth Rs 15.3 Billion. Thanksgiving holidays may reduce their trading activities for the rest of the week.

DIIs were net buyers of equity worth Rs 22.7 Billion, as per provisional figures. Nifty gained 58 points (0.6%).

For the Apr-Oct '17 period, India's trade deficit has soared to US $88 Billion, which is 60% higher than the deficit during Apr-Oct '16. Weak export growth of 9% YoY and a sharp 23% rise in imports caused the damage.

The following comments appeared in last week's technical update on the daily bar chart pattern of Nifty: "The facts that two small upward 'gaps' formed on Oct 13 & 25 have been filled and the 10100 level wasn't breached on a closing basis have improved the chances of a recovery by the index."

Using its rising 50 day EMA as a springboard, Nifty vaulted above the resistance level of 10200 on Thu. Nov 16. On Fri. Nov 17, the index moved above its 20 day EMA with a 36 points upward 'gap' that signalled an end to the correction from the Nov 6 top of 10490.

On Mon. Nov 20, the index partly filled Friday's upward 'gap' but closed higher after receiving good support from its 20 day EMA. On Tue., the index formed another small (5 points) upward 'gap', but FII selling stalled the upward momentum. 

Today's trading has formed a bearish 'hanging man' candlestick pattern that can lead to a bit of correction or consolidation. Daily technical indicators are in bullish zones, but their upward momentum is looking weak.

Nifty's TTM P/E has moved up to 26.40 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen sharply towards its overbought zone and may limit index upside.

Nifty is trading above its three EMAs in a bull market, and has retraced almost 70% of its recent correction. However, a convincing move above the Nov 6 top of 10490 is required for bulls to regain complete control of the chart. Bears may try to prevent that from happening soon.

WTI and Brent Crude Oil charts: consolidating within symmetrical triangle patterns

WTI Crude Oil chart

The following remarks appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "Daily technical indicators are looking quite overbought. Slow stochastic is showing negative divergence by failing to touch a new high with oil's price. A pullback towards 55 is a possibility."

Oil's price rose to touch a new intra-day high of 57.92 on Nov 8, but formed a 'reversal day' bar (higher high, lower close) that triggered a correction to an intra-day low of 54.81 on Nov 14.

Good support from the 20 day EMA prevented a deeper correction. Oil's price rose to touch a lower top of 56.77 on Nov 20 and formed another 'reversal day' bar (higher high, lower close).

Another test of support from the 20 day EMA is a possibility. If the support breaks, oil's price can drop to the zone between 52 & 53.

The entire trading during Nov '17 has formed a 'symmetrical triangle' pattern from which a breakout can occur upwards or downwards. Daily technical indicators are in bullish zones after correcting overbought conditions, but are not showing much upward momentum.

Increase in US crude oil production due to recent higher oil prices has become a matter of concern for OPEC and non-OPEC producers, who will be meeting on Nov 30 to discuss their production restriction deal that is going to expire in Mar '18.

On longer term weekly chart (not shown), oil's price slipped down after facing resistance from its sliding 200 week EMA, but closed well above its 20 week and 50 week EMAs. Weekly technical indicators are in bullish zones, but showing signs of correcting down.

Brent Crude Oil chart

The daily bar chart pattern of Brent Crude Oil touched an intra-day high of 64.65 on Nov 7, but formed a 'reversal day' bar (higher high, lower close) that triggered a correction to the zone between 61 & 62. (The possibility was mentioned in the previous post.)

After receiving good support from its 20 day EMA, oil's price bounced up to touch a lower top of 62.92 on Fri. Nov 17 - only to slip down and close just above 62 on Nov 20.

The entire trading during Nov '17 has formed a 'symmetrical triangle' pattern from which a breakout can occur upwards or downwards. The fact that oil's price failed to test resistance from the upper edge of the 'triangle' has increased the chances of a downward breakout.

Daily technical indicators have corrected overbought conditions, and are showing slight downward momentum. A downward breakout from the 'triangle' can drop oil's price to the zone between 58 & 59.

On longer term weekly chart (not shown), oil's price slipped down below its 200 week EMA but managed to close above it. Weekly technical indicators are correcting overbought conditions. Slow stochastic has formed a 'double top' reversal pattern inside overbought zone, and can trigger a correction.

S&P 500 and FTSE 100 charts (Nov 17 '17): bears flexing their muscles again

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 made a couple of attempts on Mon. (Nov 13) and Thu. (Nov 16) to pullback to the lower edge of the 'rising wedge' (refer last week's post), but faced resistance from the 2590 level.

The index has been in a down trend (marked by purple down trend line) since touching a high of 2597 on Nov 7. The pullbacks were used by bears to sell. Strong volumes on recent down days mean that bears may not retreat in a hurry.

The index managed to close above its three EMAs in bull territory, with just a 3 points loss for the week. Bulls are fighting hard to maintain their dominance.

Daily technical indicators are looking bearish. MACD and RSI are showing downward momentum in bullish zones. Slow stochastic has slipped into bearish zone. All three indicators are showing negative divergences by touching lower bottoms on Wed. (Nov 15) while the index touched a higher bottom.

The index is trading well above its rising 50 day and 200 day EMAs in a bull market. However, this bull market is a little long in the tooth, and hasn't faced a decent 8-10% correction in quite a while. So, part profit booking and waiting for a convincing breakout above the (purple) down trend line may be good ideas.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators have started correcting inside their respective overbought zones. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 had dropped and closed below its 20 day and 50 day EMAs and the (purple) down trend line in the previous week. Bearish technical indicators had hinted at some more correction (refer last week's post).

The index continued to fall towards its 200 day EMA, but appears to have found some support near the 7350 level. Daily technical indicators are in bearish zones, but RSI and Slow stochastic have stopped falling.

Negative divergence visible on the Slow stochastic, which touched a lower bottom inside its oversold zone while the index touched a much higher bottom, has left the door open for the index to test support from its 200 day EMA. 

However, an oversold Slow stochastic can also trigger a pullback towards the (purple) down trend line. (At the time of writing this post, the index is again testing support from the 7350 level.)

On longer term weekly chart (not shown), the index closed below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly technical indicators are looking bearish and showing downward momentum.

Sensex, Nifty charts (Nov 17, 2017): bulls regaining control

FIIs were net buyers of equity on Tue. (Nov 14) & Fri. (Nov 17), but net sellers on the other three days. DIIs were net sellers of equity on Mon. (Nov 13) and Tue. but net buyers on the other three days.

For the week, FIIs were net buyers of equity worth Rs 27.9 Billion; DIIs were also net buyers of equity worth Rs 29.1 Billion, as per provisional figures. 

Sensex eked out a gain of 28 points while Nifty lost 38 points on a weekly closing basis. More importantly, both indices bounced up from important support levels - helping bulls to regain the initiative.

The initial euphoria of bulls on Fri. - due to the ratings upgrade of India's sovereign bonds by Moody's - appeared to diminish as trading drew to a close.

BSE Sensex index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of Sensex: "Some more correction towards the top of the downward-sloping channel is a possibility. Note that the 50 day EMA is just above the channel, and should provide additional support."

As expected, the index corrected below its 20 day EMA, but bounced up after finding twin supports from the 50 day EMA and the top of the downward-sloping channel.

By touching a low of 32684 on Wed. Nov 15, the index tested its Aug 2 top of 32686 and retraced 42.5% of its rally from the Sep 28 low of 31082 to the Nov 7 top of 33866. That is a little less than the 50% Fibonacci retracement level used by technical traders as a trend deciding level.

Daily ROC, RSI and Slow stochastic are in bearish zones, but showing signs of upward momentum. MACD is below its signal line in bullish zone, but has stopped falling.

The bull market correction - more of a time-wise correction than a price-wise correction - seems to be over. The index should rise to new highs soon, though India Inc.'s Q2 earnings growth is nothing to write home about.

If you hold fundamentally strong stocks in your portfolio, add to them instead of searching for new ideas near an index top. The 'easy money' in 'cheap' stocks has already been made. 

NSE Nifty index chart pattern

The following comments appeared in last week's post on the weekly bar chart pattern of Nifty: "The index may correct a bit more. Expect strong support from the 'support zone' between 10100 and 9700."

The index bounced up from the 'support zone' to close near its opening level for the week, forming a 'hammer' candlestick pattern with bullish implications. 

Note that the 10100 level, which had acted as a resistance level in Jul '17 and Sep '17 has now turned into a support level.

By touching an intra-week low of 10094, the index retraced 49.4% of its 802.9 points rally - from the low of 9687.55 (week ending Sep 29) to the high of 10490.45 (week ending Nov 10). That is almost equal to the 50% Fibonacci retracement level used by technical traders as a trend deciding level.

The index is trading above its three rising weekly EMAs in a bull market. Weekly technical indicators are looking bullish and overbought. Some consolidation is possible before the index rises to a new high.

Nifty's TTM P/E has slipped further to 26.14, but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) is falling in neutral zone and hinting at some index upside.

Bottomline? Sensex and Nifty charts have bounced up from important support levels. The corrections provided adding opportunities. Bulls are regaining control. Stock picking skills will now be tested, so be very choosy about what you buy.

Reality check about Moody's ratings upgrade and Why investors should avoid IPOs

Moody's Ratings Upgrade - a reality check

"Moody's Investors Service upgraded its ratings on India's sovereign bonds for the first time in nearly 14 years on Friday (Nov 17 '17), saying continued progress on economic and institutional reform will boost the country's growth potential.

The agency said it was lifting India's rating to Baa2 from Baa3 and changed its rating outlook to stable from positive as risks to India's credit profile were broadly balanced."

The Finance Minister and various government functionaries wasted no time in appearing on various TV channels to tom-tom the 'achievement' as an endorsement of the NDA government's financial reforms and fiscal prudence by an 'internationally reputed ratings organisation'.

Now, here is the reality check (from a Reuter's article):

"Moody's upgrade, its first since January 2004, moves India's rating to the second lowest level of investment grade. Standard & Poor's has kept India at the lowest investment grade just above junk status for a decade and Fitch Ratings for one year longer."

There is no guarantee that S&P or Fitch will follow Moody's in upgrading India's sovereign bonds ratings. In other words, as of now, two out of three 'internationally reputed ratings organisations' have kept India's sovereign bonds ratings just above junk status.

The ratings upgrade by Moody's is definitely a positive sign - but not a huge deal just yet. Expecting FDI to pour in may be a bit premature. However, FIIs did join DIIs as net buyers of equities on Friday (Nov 17). The rally in the stock market is likely to continue next week. 

Why investors should avoid IPOs

A recent article in bloombergquint.com mentioned that 32 companies have cumulatively raised Rs 50,000 Crores from IPOs so far this year - the highest on record. "Promoters and (existing) shareholders walked away with the bulk of the gains by offloading stakes."

"Shares of 23 of the 32 companies that have gone public this year either declined or gave low returns since the close on the first day of trading." 

20 companies have provided negative returns from the closing level on the first day of listing till Nov 15. 3 companies have gained less than 5%. 5 companies have gained between 10% & 49%. The balance 4 companies - Avenue Supermarts, PSP Projects, Apex Frozen Foods and Shankara Building Products - have gained between 72% & 132%.

If you have been thinking about jumping on to the IPO bandwagon in the hope of making gains on listing, think again. The odds are not in your favour. 

Technical updates – Gayatri Projects and IRB Infrastructure

With the economy showing signs of settling down after absorbing the double-whammy of demonetisation and GST implementation, focus of investors and analysts is shifting towards the neglected infrastructure sector once again.

Fortunes of shareholders of two companies from the construction sector - Gayatri Projects and IRB Infrastructure - have taken divergent paths. The stock of Gayatri Projects has gained 47% in the past two years, while the stock of IRB Infra has lost 7%.

On the financial front, Gayatri Projects has a debt/equity ratio of 2.22 and its financial expenses are 200% higher than its net profit. IRB Infra has a lower debt/equity ratio of 1.23 and its financial expenses are 50% higher than its net profit.

Gayatri Projects is trading at a P/E of 9.2. IRB Infra is trading at a four times higher P/E of 39.9. 

Gayatri Projects

The closing stock price of Gayatri Projects formed a 'triple bottom' reversal pattern below its three EMAs during Feb '16 and May '16. That triggered a price recovery that faced strong resistance from its Nov '15 top of 151.50.

A breakout with good volume support above 151.50 on Apr 17 '17 failed to sustain above the resistance level. Another breakout on Jun 5 '17 managed to keep the stock price above the resistance level, which was subsequently tested on Jul 5 '17 and Aug 10 '17 and turned into a support level.

The stock rose to touch a new high of 201.75 on Nov 16 '17 (note that the stock's face value was split from Rs 10 to Rs 2 in Feb '17). Daily technical indicators are looking bullish but showing negative divergences by failing to touch new highs with the stock's price.

Some correction or consolidation may occur. For the past two months, bulls are buying every dip, so corrections have been shallow.

IRB Infrastructure

The closing stock price chart of IRB Infrastructure has frustrated long-term investors but given plenty of opportunities to short-term traders. The chart shows three bearish phases and three bullish phases during the past two years.

Light blue ovals have marked every crossing of the 50 day EMA below (death cross) or above (golden cross) the 200 day EMA. The 200 day EMA itself has meandered sideways for the past two years - giving no advantage to bulls or bears.

Daily technical indicators are looking bearish after correcting overbought conditions. The stock price touched a higher bottom of 200.60 on Aug 10 '17, and may attempt to rise past its May 2 '17 top of 266.80.

(If you wish to enter either of these stocks, or any other stocks from the construction sector, you are on your own. The sector typically has high debt and uneven cash flows and profits.)

Nifty chart: a midweek technical update (Nov 15 ‘17)

FIIs and DIIs were both net buyers of equity during the first three days of trading this week - worth Rs 19.6 Billion and Rs 6 Billion respectively as per provisional figures. Still Nifty lost 204 points (almost 2%).

Interestingly, FIIs were net sellers on Mon. (Nov 13) & Wed. (Nov 15), while DIIs were net sellers on Mon. & Tue. (Nov 14).

Inflation is inching up again because of higher food and fuel prices. CPI rose to 3.58% - a 7 months high - in Oct '17 against 3.28% in Sep '17. WPI rose to 3.59% - a 6 months high - in Oct '17 against 2.6% in Sep '17. RBI is likely to maintain status quo on interest rates.

Exports declined 1.12% to US $23 Billion while imports grew 7.6% to US $37.1 Billion in Oct '17. The trade deficit widened to $14.1 Billion from $11.1 Billion in Oct '16.

The daily bar chart pattern of Nifty continued its correction from the Nov 6 top of 10490. The index has fallen below its 20 day and 50 day EMAs and is near the lower edge of the 'support/resistance zone' between 10100 & 10200.

Bullish hopes of an intermediate bottom formation have been raised because the index touched an intra-day low of 10094 today - retracing almost 50% of its entire 802 points rally from the Sep 28 low of 9688. (The 50% Fibonacci retracement level is treated by many technical traders as a trend deciding level.)

The facts that two small upward 'gaps' formed on Oct 13 & 25 have been filled and the 10100 level wasn't breached on a closing basis have improved the chances of a recovery by the index.

Daily technical indicators are looking bearish and showing strong downward momentum. MACD is falling below its signal line in bullish zone. RSI is falling below its 50% level. Slow stochastic is well inside its oversold zone, and may trigger a pullback.

Nifty's TTM P/E has moved down to 25.72 - still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply in its neutral zone and looks ready to enter its oversold zone. That may limit index downside.

The index is trading well above its rising 200 day EMA in a bull market, and has corrected less than 4% from its Nov 6 top. Many fundamentally sound stocks have corrected much more because their Q2 (Sep '17) results disappointed the market. Those are the ones to put on a 'buy list'.

Investors would do well to remain circumspect. If the 10100 level gets breached - and the possibility can't be ruled out entirely - the index can fall another 100 points, where support from the 61.8% Fibonacci retracement level may kick in. A fall below 10000 can drop the index to 9700 (its previous support level in Aug '17 & Sep '17).

Gold and Silver charts: battle between bulls and bears reach a stalemate

Gold chart pattern

The following comments appeared in the previous post on the daily bar chart pattern of Gold: "Another test of support from the 200 day EMA seems on the cards. A possible breach of the 200 day EMA can drop gold's price to the zone between 1240 & 1250."

There were several tests of support, and even a few intra-day breaches of the 200 day EMA between Oct 26 and Nov 6. However, bulls put up a good fight as gold's price failed to close below the 200 day EMA even for a single day.

Technically, the 200 day EMA did not get breached, giving bulls the upper hand. On Nov 9, gold's price rose above its 20 day and 50 day EMAs to touch a lower top of 1289.50. Bears used the 'sell on rise' strategy, and are not showing any signs of giving up. 

Daily technical indicators are sending mixed signals - which is often the case during periods of consolidation. MACD is above its signal line - moving sideways in bearish zone. RSI is also in bearish zone - just below its 50% level. Slow stochastic is in bullish zone, but showing downward momentum.

On longer term weekly chart (not shown), gold’s price closed below its 20 week EMA but above its 50 week and 200 week EMAs in long-term bull territory.  Weekly MACD and Slow stochastic are looking bearish and showing downward momentum. RSI is in neutral zone.

Silver chart pattern

The following comments appeared in the previous post on the daily bar chart pattern of Silver: "It (silver's price) has been oscillating about its three EMAs, which have converged together. A sharp move is likely to follow. Odds are better for a downward move."

On Oct 27, the expected downward move touched a higher intra-day low of 16.62 and bounced up above its three EMAs. Bears used the 'sell on rise' strategy, pushing down silver's price below its 200 day EMA and gaining a slight advantage.

For the past 5 weeks, silver's price has been consolidating sideways within a 'symmetrical triangle' pattern, from which a breakout can occur upwards or downwards.

Since silver's price entered the 'triangle' after a corrective move, the likelihood of a downward breakout is greater. However, it may be prudent to wait for the breakout before deciding to buy or sell.

Daily technical indicators are giving conflicting signals. MACD has merged with its signal line and is moving sideways in bearish zone. RSI is at its neutral zone. Slow stochastic is falling towards its 50% level.

On longer term weekly chart (not shown), silver’s price closed between its 20 week and 50 week EMAs, and below its sliding 200 week EMA in a long-term bear market. Weekly MACD and RSI are in neutral zones. Slow stochastic is in bearish zone.

S&P 500 and FTSE 100 charts (Nov 10 '17): bears stall bull rallies

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 touched another new high of 2597 on Tue. Nov 7, but formed a small 'reversal day' pattern (higher high, slightly lower close).

Negative divergences on daily technical indicators triggered a correction below a bearish 'rising wedge' pattern (the possibility was mentioned in last week's post) that dropped the index below its 20 day EMA and the 2570 level intra-day on Nov 9. 

The index pulled back to close at the lower edge of the 'wedge' - forming a bearish 'hanging man' candlestick pattern. The stock closed the week below the 'wedge' but above its three EMAs and the 2580 level, losing just 5 points (0.2%) for the week.

Daily technical indicators are showing downward momentum in bullish zones. Some more correction is possible. Bulls have been 'buying the dips' - so the advantage remains with them.

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but formed a weekly 'reversal bar' (higher high, lower close). Weekly technical indicators are showing signs of correcting from their respective overbought zones. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 touched a 5 months high of 7583 on Tue. Nov 7 but formed a 'reversal day' bar (higher high, lower close) that triggered a sharp correction.

Negative divergences visible on the daily technical indicators (which touched lower tops while the index rose higher) helped the cause of bears. The index closed below its 20 day and 50 day EMAs and the (purple) down trend line - losing 1.7% for the week.

Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI and Slow stochastic are falling in bearish zones. Some more correction is likely.

The index is trading above its rising 200 day EMA. That means the bull market is intact despite the correction.

On longer term weekly chart (not shown), the index received support from its 20 week EMA and closed above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD and Slow stochastic are showing downward momentum in bullish zones. Weeky RSI is seeking support from its 50% level.

Sensex, Nifty charts (Nov 10, 2017): bears make their presence felt

FIIs were net sellers of equity worth Rs 40.4 Billion during the week; DIIs were net buyers of equity worth Rs 28.8 Billion, as per provisional figures. Their roles were reversed during the first two days of the week, as FIIs were net buyers of equity while DIIs turned net sellers.

Sensex and Nifty touched new highs but faced profit booking and closed lower for the week - by 1.1% and 1.25% respectively. Some more correction can't be ruled out.

Continuing impact of demonetisation and GST slowed industrial growth in Sep '17. The IIP number was 3.8% against 4.5% (revised from 4.3%) in Aug '17 and 5.7% in Sep '16. For the Apr-Sep '17 period, IIP was down 11.7% from the same period last year.

BSE Sensex index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "...negative divergences in three of the four indicators should be treated as a warning sign. A pullback towards the top of the sideways consolidation channel is a possibility."

The index touched a new high of 33866 on Tue. Nov 7, but formed a 'reversal day' bar (higher high, lower close) that triggered a correction. The 20 day EMA is providing good support, raising bullish hopes of a shallow correction. 

Daily technical indicators have dropped from their overbought zones. MACD has crossed below its signal line. ROC formed a 'triple top' reversal pattern and crossed below its 10 day MA. RSI slipped down from its overbought zone but is trying to re-enter it. Slow stochastic is falling towards its 50% level.

Some more correction towards the top of the downward-sloping channel is a possibility. Note that the 50 day EMA is just above the channel, and should provide additional support.

The index is trading above its three rising EMAs in a bull market. The correction is providing an adding opportunity.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new intra-week high (10490) but formed a 'reversal bar' (higher high, lower close) that often signals an intermediate top.

The index is trading above its three rising weekly EMAs in a bull market. Weekly MACD and Slow stochastic are moving sideways inside their respective overbought zones. ROC and RSI are sliding down in bullish zones.

The index may correct a bit more. Expect strong support from the 'support zone' between 10100 and 9700. The rising 20 week EMA is inside the 'support zone' and should provide additional support.

Nifty's TTM P/E has slipped down to 26.35, but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) is poised to re-enter its overbought zone and can limit immediate upside.

GST on several items have been brought down from the highest slab rate of 28%. That may lead to some buoyancy in the index next week.

Bottomline? Sensex and Nifty charts show the effects of profit booking after touching new highs again. The corrections are expected to be shallow, and can be used as adding opportunities. But don't bet the farm.