Wednesday, November 22, 2017

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.

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