ANNOUNCING re-opening of paid subscriptions to my Monthly Investment Newsletter

I am pleased to announce the re-opening of paid subscriptions to my monthly investment newsletter for a 3 weeks period from Jan 1-21, 2018. A limited number of subscriptions are being offered to blog visitors, blog followers, blog subscribers and twitter followers – on a first-come first-served basis, to enable me to provide personalised attention and guidance to each subscriber.

If you are interested in subscribing, please send an email to: mobugobu@yahoo.com at the earliest for details.

The newsletter has completed 96 issues, with its share of hits and misses. The stock market closed the year at a lifetime high. Sensex gained almost 28% and Nifty gained 28.6% during 2017, but both indices have been in consolidation mode during the past two months.

Many mid-cap and small-cap stocks made excellent gains - which made stock selection difficult as finding value became a challenge. The 2 months long market consolidation since Nov '17 brought down most selected stocks from their peaks – affecting year-end performance. It is gratifying that subscribers have still kept faith in my stock picking abilities. 

Those who have been regularly following my blog posts over the past few years may know what kind of stocks to select, and what type of stocks to avoid. The guiding principle is to choose well-managed, financially prudent companies that generate cash from operations, have low debt, give steady (rather than spectacular) returns and have growth prospects.

Non-subscribers may be interested to know how the recommended 12 mid-cap and small-cap stocks have fared during the past 12 months. Without revealing the names of the stocks (it won’t be fair to my subscribers to do so), here is a brief summary of performance as on Dec 29, ‘17:

• 6 stocks have gained more than 25%, of which 2 have gained between 25-50%; 3 have gained between 50-99%; 1 has gained 100%
• Of the balance 6 stocks, 2 have gained between 10-25%, 2 have gained between 0-9% and 2 have lost 3% & 34%
• All 12 stocks had touched higher levels after monthly recommendations

That may not appear all that great, but remember that the market has been consolidating for the past 2 months - thanks to FII selling. So, let me provide a different perspective on the above performance:

By blindly investing (not recommended) Rs 20,000 in each of the 12 stocks and holding on till Dec 29 ‘17, a subscriber would be sitting on gains of nearly Rs 80,000 (33%) – outperforming Sensex (28%) and Nifty (28.6%).

What is important to understand is that none of these stocks were ‘cheap’ – fundamentally strong stocks rarely are - and some had already run up a lot when they were recommended.

The selected stocks are meant to be held for 2-3 years. Over the next 24 months, the laggards are expected to catch up with the leaders. Also, stop-loss levels are suggested every month so that small losses don't turn into big ones. 

If you wish to add fundamentally strong mid-cap and small-cap stocks with growth potential to your portfolio, why wait? Just subscribe to my Monthly Investment newsletter. Send me an email (at mobugobu@yahoo.com) soon – subscriptions will close on Jan 21, 2018.

Sensex, Nifty charts (Dec 29, 2017): close the year at lifetime highs

FIIs were net sellers of equity worth Rs 64.1 Billion for the month of Dec '17. It was their 5th straight month of net selling. They were net sellers in 9 of the previous 12 months.

DIIs were net buyers of equity worth Rs 81.4 Billion during Dec '17, as per provisional figures. They were net buyers of equity in 11 of the past 12 months. Sensex gained 7430 points (27.9%) and Nifty gained 2345 points (28.6%) during calendar year 2017.

India's fiscal deficit during Apr-Nov 2017 was Rs 6120 Billion, which touched 112% of the budget estimate for the period Apr 2017-Mar 2018. During Apr-Nov 2016, the fiscal deficit was 85.8% of the budget estimate. Lower GST collections and higher expenditure inflated the deficit.

BSE Sensex index chart pattern

The following remark was made in last week's post on the daily bar chart pattern of Sensex: "Sensex is trading above its three rising EMAs in a bull market, and should continue to move higher on the back of liquidity inflows into domestic mutual funds."

In F&O settlement trading week truncated by Christmas holiday on Mon., the index touched a new intra-day high of 34138 on Wed. Dec 27 and ended the week, month and year at a new closing high of 34057 on Fri. Dec 29.

Daily technical indicators are looking bullish. MACD is rising above its signal line in bullish zones. ROC, RSI and Slow stochastic are in the process of correcting overbought conditions.

The index is trading above its three rising EMAs in a bull market. However, the move above the 'flag' has been more of a sideways consolidation with an upward bias rather than a full-fledged rally.

Festive season considerations and uncertainty about forthcoming Q3 (Dec '17) corporate results kept bulls in check. Earnings growth of India Inc. may show improvement because Q3 (Dec '16) corporate results were badly affected by demonetisation of high value currency.

Any pullback towards the top of the 'flag' can be used to add to existing holdings. But there is no point in waiting for such a pullback because it may not happen. So, keep investing according to your asset allocation plans.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose to touch new intra-week (10552) and closing (10531) highs during the last week of trading in 2017. The index is trading above its three rising weekly EMAs in a bull market.

Is it time for bears to go into hibernation? Not yet. The index formed a 'doji star' weekly candlestick with a volume surge, which can be a sign of a 'buying climax'. A pullback towards the top of the 'flag' may be in the offing.

Note that a 'buying climax' is often followed by a correction, but seldom occurs at a market top. It is usually followed by a move to new highs. (Note the index behaviour following the previous 'buying climax' in the last week of Jul '17 - marked by red arrow.)

Nifty's TTM P/E has increased to 26.92 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen deep inside its overbought zone, and can trigger a correction. (Coincidentally, the previous occasion when TRIN looked so overbought was in the last week of Jul '17.)

Bottomline? Sensex and Nifty charts have closed at lifetime highs after breaking out above bullish 'flag' patterns in the previous week. Both indices appear to be hesitating before Q3 (Dec '17) results season. Lower base effect can lead to some earnings growth in Q3. Any pullbacks towards the top of the 'flag' patterns can be used to add to existing holdings.

About the Fibonacci sequence and the Golden Ratio

There is a special ratio that can be used to describe the proportions of everything from nature's smallest building blocks, such as atoms, to the most advanced patterns in the universe, such as unimaginably large celestial bodies. 

Nature relies on this innate proportion to maintain balance, but the financial markets also seem to conform to this 'golden ratio.' Here we take a look at some technical analysis tools that have been developed to take advantage of it.

Read more at:
https://www.investopedia.com/articles/technical/04/033104.asp

Nifty chart: a midweek technical update (Dec 27 ‘17)

Trading activity remained at a low-key during the first two days of a Christmas holiday-shortened F&O expiry week. FIIs were net buyers of equity worth Rs 1.3 Billion, as per provisional figures.

DIIs were net buyers of equity worth Rs 3.4 Billion. Nifty touched a new high of 10552.40 today but closed lower at 10491 - just a point higher than its Nov 6 '17 top of 10490.

The Indian government plans to raise Rs 500 Billion during Jan-Mar '18 through dated government securities - a move that may put a burden on the fiscal deficit target of 3.2% of GDP.

Grant Thornton's International Business Report survey data showed that India's businesses are most positive (58%) in the Asia-Pacific region about the opportunities presented by increasing spending power of the middle class.

The daily bar chart pattern of Nifty had broken out last week above the 'flag' pattern within which it was consolidating since Nov 6 '17.  The index moved up to touch a new high today, but profit booking led to the formation of a small 'reversal day' bar (higher high, lower close) that can cause a pullback towards the top of the 'flag'.

Daily technical indicators are in bullish zones, but only MACD is showing upward momentum. RSI has started to move down. Slow stochastic is overbought. All three are showing negative divergences by failing to touch new highs with the index.

Nifty's TTM P/E is at 26.85 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling swiftly inside its overbought zone - and can trigger a correction.

The index is trading above its three rising EMAs in a bull market. 'Buy the dips' should be the strategy one should follow. But choose your stocks carefully.

Note that 'flag' patterns often form in the middle of an up (or down) move. The up move from the Dec '16 low to the Nov '17 top covered about 2500 points. That hints at a further rally of 2500 points from the 'flag' - giving an upward target of about 12500 for Nifty.

Already a couple of analysts have projected Nifty targets of 12000 by Mar '19. Now you know why. Just remember that an index doesn't understand logic or arithmetic. So, targets - whether upward or downward - are approximate at best, and are based on past patterns which may or may not repeat.

Gold and Silver charts: pullback rallies running out of steam?

Gold chart pattern

Note the following remarks from the previous post on the daily bar chart pattern of Gold: "More correction can't be ruled out. However, a pullback towards the 200 day EMA can occur at any time. That will provide a selling opportunity."

Gold's price fell to an intra-day low of 1238 on Dec 12 - its lowest level in 5 months. That triggered the expected pullback rally towards the 200 day EMA. On Dec 22, gold's price closed above its three EMAs in bull territory after more than 3 weeks.

The pullback rally has been accompanied by receding volumes. The rally may not last long. Another bear onslaught can occur at any time.

Daily technical indicators are looking bullish. MACD has crossed above its signal line and is rising in bearish zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone, and can limit further upside in gold's price.

On longer term weekly chart (not shown), gold’s price rallied to close above its three weekly EMAs in long-term bull territory.  Weekly MACD and RSI are in neutral zones. Slow stochastic is trying to emerge from its oversold zone.

Silver chart pattern

Note the following comments from the previous post on the daily bar chart pattern of Silver: "Daily technical indicators are looking bearish and oversold. That can trigger a technical bounce, which will provide bears another opportunity to sell."

Silver's price touched an intra-day low of 15.65 on Dec 12, followed by a technical bounce above its 20 day EMA. 50 day and 200 day EMAs are still falling, and silver's price is trading below them in a bear market.

Daily technical indicators have corrected oversold conditions and are showing upward momentum. MACD has crossed above its signal line in bearish zone. RSI has just managed to move above its 50% level. Slow stochastic has climbed up to the lower edge of its overbought zone.

Low volumes during the technical bounce means bulls may be running out of breath. Bears are likely to attack soon.

On longer term weekly chart (not shown), silver’s price closed below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones. Slow stochastic is trying to emerge from its oversold zone, and hinting at some more upside in silver's price.

S&P 500 and FTSE 100 charts (Dec 22 '17): touch lifetime highs

S&P 500 index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of S&P 500: "Negative divergences visible on RSI and Slow stochastic (both failed to touch new highs with the index) can lead to another corrective dip."

The index formed an upward 'gap' and touched a new high of 2695 on Mon. Dec 18. Negative divergences visible on RSI and Slow stochastic led to a dip down to a low of 2676, which filled the 'gap' on Wed. Dec 20.

Bulls bought the dip - as they have been doing repeatedly during the past year's relentless rally. The index is trading well above its three rising EMAs in a bull market, and closed with a weekly gain of 0.3%.

There is a possibility that the 'gap' formed on Mon. Dec 18 was an 'exhaustion gap' - as it was preceded by a sharp surge in volumes. A deeper correction may follow.

Daily technical indicators are looking overbought, and showing slight downward momentum.

On longer term weekly chart (not shown), the index touched a new high and closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought. Slow stochastic is showing negative divergence by failing to touch a new high with the index.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 finally reversed the previous 7 months' down trend. The index closed at a 52 week high of 7604 on Thu. Dec 21, and has formed a bullish pattern of 'higher top, higher bottom' from its Sep '17 low.

On Fri. Dec 22, the index rose 10 points higher but closed lower to form a small 'reversal day' bar, but trading volume (not shown) was significantly lower before the long X'mas weekend. 

Daily technical indicators are in bullish zones. Slow stochastic is inside its overbought zone, and can trigger some consolidation or correction.

On longer term weekly chart (not shown), the index touched a 3 year high and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but showing negative divergences by failing to touch new highs.

(Wishing all blog followers, visitors, subscribers, twitter followers Season's Greetings and a very happy and prosperous New Year.) 

Sensex, Nifty charts (Dec 22, 2017): break out above 'flag' patterns to touch new highs

FIIs were net sellers of equity worth Rs 26.2 Billion during the week. DIIs were net buyers of equity worth Rs 35.3 Billion, as per provisional figures. Sensex and Nifty broke out above 'flag' patterns to touch new highs.

IMF Economic Counsellor and Director of Research Maurice Obstfeld said that although demonetisation as well as implementation of the Goods and Services tax (GST) caused short-term disruptions, both measures would bring long-term benefits.

RBI has warned against further downside risk for the banking sector as asset quality concerns are far from over. Deleveraging in heavily indebted parts of the corporate sector and slow credit growth may delay country's economic revival. 

BSE Sensex index chart pattern

Note the following comments from last week's post on the daily bar chart pattern of Sensex: "An upward breakout above the 'flag' pattern appears inevitable. Whether the breakout will be followed by a pullback to the top of the 'flag' or not may depend on the margin of NDA's victory in the two states."

NDA's victory in Himachal was by a good margin, but it was touch and go for a while in Gujarat. Sensex did breakout upward from the 'flag' pattern, but the breakout was not a convincing one.

The index formed a 'reversal day' (higher high, lower close) bar on Wed. Dec 20, which led to a pullback to the top of the 'flag' on Thu. Dec 21. The index bounced up to touch (33964) and close (33940) at new highs on Fri. Dec 22 - but is less than 100 points above its Nov 7 '17 top of 32866.

Sensex is trading above its three rising EMAs in a bull market, and should continue to move higher on the back of liquidity inflows into domestic mutual funds. 

Daily technical indicators are in bullish zones. MACD is rising above its signal line in bullish zone. RSI is about to enter its overbought zone. Slow stochastic is inside its overbought zone, but its upward momentum has stalled.

ROC is looking a bit bearish by correcting inside its overbought zone. All four indicators failed to touch new highs with the index. The negative divergences can trigger some consolidation or correction during F&O expiry week.

Dec '17 is the 5th straight month of net selling in equities by FIIs. Unless earnings of India Inc. show improvement in the next couple of quarters, don't expect them to turn buyers. A runaway Sensex rally - like the one during the first 7 months of 2017 - is unlikely to be repeated in 2018.

NSE Nifty index chart pattern

As expected, the weekly bar chart pattern of Nifty broke out above the 'flag' pattern after 6 weeks of consolidation, and rose to touch new intra-week (10501) and closing (10493) highs.

Strong volume support technically validated the upward breakout. All three EMAs are rising, and the index is trading above them in a bull market. 

Note that the week's close was just 3 points above the previous top of 10490 touched 6 weeks back. Bulls still have some work left before bears can be sent away to hibernate.

Weekly technical indicators are in bullish zones, but only Slow stochastic is showing upward momentum. All four are showing negative divergences by failing to touch new highs with the index. A pullback to the top of the 'flag' may be on the cards.

Nifty's TTM P/E has increased to 26.86 - well above its long-term average. The breadth indicator NSE TRIN (not shown) has bounced up after briefly entering its overbought zone, and can limit index upside.

Bottomline? Sensex and Nifty charts have broken out above bullish 'flag' patterns within which they were consolidating for the past 6 weeks. The breakouts haven't been too convincing. Any pullbacks can be used to add to existing holdings.

Retracement or Reversal: Know the Difference

Most of us have wondered whether a decline in the price of a stock we're holding is long term or a mere market hiccup. Some of us have sold our stock in such a situation, only to see it rise to new highs just days later. This is a frustrating and all too common scenario, but it can be avoided if you know how to identify and trade retracements properly.

Retracements are temporary price reversals that take place within a larger trend. The key here is that these price reversals are temporary, and do not indicate a change in the larger trend.

Read more at:
https://www.investopedia.com/articles/trading/06/retracements.asp 

Related Post
About Nifty Fibonacci retracement levels

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

FIIs were net sellers of equity worth Rs 23.4 Billion during the first three days of trading this week. Bulk of their selling occurred today after Nifty touched a new lifetime high of 10494.

DIIs were net buyers of equity worth Rs 15.8 Billion, as per provisional figures. Nifty gained 111 points (1.1%).

Statistics from FICCI's quarterly survey suggests slightly less optimistic outlook for the manufacturing sector during Q3 (Oct-Dec '17) due to Rupee appreciation impacting exports, issues with GST implementation and subdued demand.

Note the following comments in last week's update on the daily bar chart pattern of Nifty: "Nifty has been consolidating within the 'flag' for the past 5 weeks - after touching a lifetime high of 10490 on Nov 6. Since a 'flag' is usually a continuation pattern, the expected breakout is upwards."

The index closed at the upper edge of the 'flag' on Fri. Dec 15 after exit polls predicted comfortable BJP victories in recently concluded state elections in Gujarat and Himachal Pradesh.

As initial results started trickling in on Mon. Dec 18 and indicated a lead for Congress over BJP, panic selling ensued. The index collapsed below 10100 before recovering all its losses as the day progressed and BJP reclaimed its lead.

Nifty broke out above the 'flag' as expected - touching a high of 10444 before closing at 10389. The rally continued on Tue. Dec 19, but stalled today after touching a new high and then closing lower to form a 'reversal day' (higher high, lower close) bar.

That can trigger a pullback towards the top of the 'flag'. Also, the upward breakout on Mon. Dec 18 was not accompanied by a significant increase in volumes required to technically validate the breakout.

Daily technical indicators are in bullish zones. MACD is showing upward momentum, but failed to touch a new high with the index. RSI's upward momentum has stalled. Slow stochastic has entered its overbought zone, and can also trigger a pullback towards the top of the 'flag'.

Nifty's TTM P/E has moved up to 26.75 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped like a stone to the edge of its overbought zone - and can trigger a correction.

The index is trading above its three rising EMAs in a bull market. Any dips can be used to add to existing holdings. 

Some analysts have suggested that stock returns in 2018 may not be as spectacular as in 2017. They may be correct in their prognosis. With a less than runaway victory for the BJP in Gujarat, expect the FM to open the investment tap and present a more populist budget in Feb '18.

That may not be great for the fiscal deficit, but can provide just the push that India's stuttering economy needs to get back on the growth track.

WTI and Brent Crude Oil charts: bull market consolidations continue

WTI Crude Oil chart

The following comments appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "Expect some more consolidation before another breakout can occur. Logically, the breakout should be upwards because oil's price is in a bull market. However, it is better to wait for the breakout because a 'triangle' pattern is unreliable."

As expected, oil's price continued to consolidate sideways within a 'symmetrical triangle' pattern in a bull market. The entire pattern has formed above the rising 50 day and 200 day EMAs, so the logical breakout should be upwards. But logic doesn't always work for 'triangle' patterns.

Daily technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD and RSI are showing downward momentum in bullish zones. Slow stochastic is showing upward momentum in bearish zone.

Oil's price may consolidate a while longer before the supply/demand balance gets tilted to one side. Which side? 

U.S. shale supply, the IEA said in its December Oil Market Report, is set to grow more than OPEC has estimated and this could be the undoing of the production cut that boosted prices this year.

On longer term weekly chart (not shown), oil's price has been struggling to close above its 200 week EMA. Weekly MACD and Slow stochastic are beginning to correct inside their overbought zones. RSI is moving sideways in bullish zone.

Brent Crude Oil chart

The daily bar chart pattern of Brent Crude Oil has been consolidating sideways since the beginning of Nov '17. The earlier 'triangle' pattern has been modified to a 'rectangle' pattern based on the trading pattern of the past two weeks.

(There is nothing unusual in such modifications. A developing pattern often changes shape, which should be incorporated to reflect the change. The important point to note is that a 'triangle' and a 'rectangle' are both sideways consolidation patterns.)

On Mon. Dec 11, oil's price rose sharply to 64.93 due to a crack in a North Sea pipeline that caused a shut down. The next day, oil's price broke out above the 'rectangle' to an intra-day high of 65.83, but closed well inside the 'rectangle' at 63.34 - forming a 'reversal day' (higher high, lower close) bar that triggered a correction below its 20 day EMA.

Daily technical indicators are giving conflicting signals, which often happens during periods of consolidation. MACD is showing downward momentum in bullish zone. RSI is moving sideways in bullish zone. Slow stochastic is showing upward momentum in bearish zone.

Trading on Mon. Dec 18 formed a 'doji' candlestick pattern that indicates indecision among bulls and bears. Some more consolidation within the 'rectangle' is likely before an eventual breakout.

On longer term weekly chart (not shown), oil's price is consolidating sideways just above its 200 week EMA in long-term bull territory. Weekly technical indicators have started to correct overbought conditions.

S&P 500 and FTSE 100 charts (Dec 15 '17): bulls keep charging ahead

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 faced a brief dip on Wed. & Thu. (Dec 13 & 14), which was gleefully bought by bulls. The index rose to touch another new high of 2680 on Fri. Dec 15 - on the back of a sharp rise in volumes - before closing slightly lower.

All three EMAs are rising and the index closed well above them in a bull market with a weekly gain of 0.9%. However, the volume spike on Fri. may be the sign of a buying climax. 

Investors pulled $16.2 billion from U.S.-based equity funds during the latest week, according to Lipper on Thu. Dec 14, marking the largest withdrawals since December 2016.

Daily technical indicators are looking bullish but overbought. An index can remain overbought for long periods. Negative divergences visible on RSI and Slow stochastic (both failed to touch new highs with the index) can lead to another corrective dip.

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 looking overbought. Slow stochastic failed to touch a new high with the index, and can trigger a correction towards the rising 20 week EMA. 

FTSE 100 index chart pattern

For the third time in 3 months, the daily bar chart pattern of FTSE 100 attempted a breakout above the (purple) down trend line that has dominated the chart since early Jun '17.

The index rose to touch a high of 7511 on Wed. Dec 13 but formed a small 'reversal day' (higher high, lower close) bar that triggered a pullback to the down trend line on Fri. Dec 15. 

However, the index bounced up from the trend line to form a large 'reversal day' (lower low, higher close) bar, and closed with a weekly gain of 1.3%.

Daily technical indicators are looking bullish. MACD has entered positive zone after a month. RSI is above its 50% level. Slow stochastic is moving down inside its overbought zone, and can limit index upside. (At the time of writing this post, the index is trading above its Wed. top of 7511.) 

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones and showing upward momentum.

Sensex, Nifty charts (Dec 15, 2017): poised to breakout above 'flag' patterns

FIIs and DIIs were both net sellers of equity in the week gone by. FII net selling was worth Rs 6.1 Billion. DII net selling was worth Rs 6 Billion.

Incidentally,  FIIs were net buyers on Tue. & Thu. while DIIs were net buyers on Mon. & Fri. Sensex and Nifty gained 0.6% on a weekly closing basis while consolidating sideways within bullish 'flag' patterns.

India's WPI inflation rose to an 8 months high of 3.93% in Nov '17, against 3.59% in Oct '17 and 1.82% in Nov '16 - on the back of higher food and oil prices.

Exports were up 30.6% while imports were up 19.6% YoY in Nov '17. Exports were worth $ 26.2 Billion against imports of $ 40 Billion - leaving a trade deficit of $ 13.8 Billion (higher than $ 13.4 Billion in Nov '16 but lower than $ 14 Billion in Oct '17).

BSE Sensex index chart pattern

Note the following remarks in last week's post on the daily bar chart pattern of Sensex: "The index needs to cross convincingly above its previous (Nov 28) top of 33770 for bulls to wrest control. Bears may try to prevent that from happening - at least till Gujarat state election results are announced."

Exit polls on Thu. Dec 14 predicted comfortable victories for NDA in Gujarat and Himachal Pradesh state elections. Bulls celebrated. The index formed an upward 'gap' on Fri., but stopped short of the upper edge of the 'flag' pattern and the Nov 28 top of 33770.

It seems bulls and bears were uncertain about the actual election results (to be announced on Mon. Dec 18). That uncertainty was reflected in the formation of a 'shooting star' candlestick pattern on Fri. Dec 15.

Daily technical indicators are looking bullish, even though RSI is still in bearish zone. ROC is showing strong upward momentum, the others are not.

The index is trading above its three EMAs in a bull market. An upward breakout above the 'flag' pattern appears inevitable. Whether the breakout will be followed by a pullback to the top of the 'flag' or not may depend on the margin of NDA's victory in the two states.

Remember that to be technically valid, any upward breakout should be accompanied by a significant increase in volumes.

NSE Nifty index chart pattern

For the past 6 weeks, the weekly bar chart pattern of Nifty has been consolidating within a 'flag' pattern, from which an upward breakout is likely. 

Despite exit poll predictions of comfortable NDA victories in recently concluded Gujarat and Himachal state elections, the index failed to breakout above the 'flag' last week.

Weekly technical indicators are in bullish zones. Only RSI is showing some upward momentum. MACD, RSI and Slow stochastic are showing downward momentum.

Nifty's TTM P/E has increased to 26.46 - well above its long-term average. A few experts on business TV channels have been proffering clever arguments to justify the high index valuation. Ignore them. Once election results are out of the way, market focus will shift to continued meagre earnings of India Inc.

The breadth indicator NSE TRIN (not shown) has fallen sharply in neutral zone and is hinting at some more index upside. With FIIs in selling mood, don't expect a runaway rally.

Bottomline? Sensex and Nifty charts have been consolidating within bullish 'flag' patterns for the past 6 weeks. Upward breakouts from 'flag' patterns are likely. Breakouts - and any subsequent pullbacks - can be used to add to existing holdings.

Portfolio Management Tips For Young Investors

Too many young people rarely, or never, invest for their retirement years. Some distant date, 40 or so years in the future, is hard to imagine. However, without investments to supplement retirement income, if any, retirees will have a difficult time paying for life's necessities.

Smart, disciplined, regular investment in a portfolio of diverse holdings, can yield good long-term returns for retirement and provide additional income throughout an investor's working life.

Read more at: 

https://www.investopedia.com/articles/younginvestors/12/portfolio-management-tips-young-investors.asp

Nifty chart: a midweek technical update (Dec 13 ‘17)

During the first three days of trading this week, FIIs were net buyers of equity worth Rs 0.8 Billion. DIIs were net sellers of equity worth Rs 8.6 Billion, as per provisional figures. Interestingly, both were net sellers of equity today. Nifty lost 73 points (0.7%).

There has been a setback in India's macroeconomic front. CPI inflation increased to a 15 months high of 4.88% in Nov '17 against 3.58% in Oct '17 due to rising food and oil prices. RBI may have no option but to raise interest rates.

The Index of Industrial Production (IIP) slowed to 2.2% in Oct '17 against an upwardly revised 4.14% in Sep '17 due to a contraction in consumer durable goods production for the second straight month.

The following remarks were made in last week's update on the daily bar chart pattern of Nifty: "Can the index bounce up from here? Technical signals...are conducive, but a sharp rally - like the one during Oct '17 - seems unlikely."

On Wed. Dec 6, the index was testing support from its 100 day EMA (not shown), and did bounce up above its 20 day and 50 day EMAs during the next three trading sessions. 

Bears sold the rise and pushed the index to a close below its 50 day EMA today. By bouncing up after touching an intra-day low of 10033 on Dec 6, a bullish 'flag' pattern has been formed.

Nifty has been consolidating within the 'flag' for the past 5 weeks - after touching a lifetime high of 10490 on Nov 6. Since a 'flag' is usually a continuation pattern, the expected breakout is upwards.

Daily technical indicators are looking bearish and showing downward momentum. MACD and RSI are in bearish zones. Slow stochastic is in bullish zone. Some more correction within the 'flag' is possible.

Nifty's TTM P/E is at 26.1 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - and can limit index downside. 

Bulls seem undecided about the likely outcome of Gujarat state elections. Anything short of a majority for NDA can lead to more index correction.

Nifty is trading above its rising 200 day EMA in a bull market. Dips can be used to add to existing holdings. Buy more on a convincing breakout above the 'flag' - whenever that occurs.

Gold and Silver charts: reeling from strong bear attacks

Gold chart pattern

The following comments were made in the previous post on the daily bar chart pattern of Gold: "Slow stochastic has risen towards its overbought zone, and can limit further upside in gold's price...Strong volume bars on recent down days mean bears are not going to yield much further ground without a proper fight."

On Nov 27, gold's price had touched an intra-day high of 1303.40, but slipped down to close just below the 'resistance zone'. The next day, it touched a slightly lower high of 1301.30, but formed a 'doji' candlestick pattern by opening and closing at almost the same level just below the 'resistance zone'.

That was a sign of indecision and weakness that bears exploited to the hilt. Gold's price plummeted below its three EMAs into bear territory, and is trying to form a bottom at 1245.

Daily technical indicators are looking bearish and oversold. More correction can't be ruled out. However, a pullback towards the 200 day EMA can occur at any time. That will provide a selling opportunity.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory.  Weekly technical indicators are showing downward momentum in bearish zones. Slow stochastic has re-entered its oversold zone, and can trigger a pullback.

Silver chart pattern

The following comments were made in the previous post on the daily bar chart pattern of Silver: "..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 Nov 29, silver's price broke out below the 'symmetrical triangle' pattern within which it was consolidating during Oct & Nov '17. It then dropped down vertically like a stone to the 'support zone' (between 15.25 & 15.75).

All three EMAs are falling, and silver's price is trading well below them in a bear market. Daily technical indicators are looking bearish and oversold. That can trigger a technical bounce, which will provide bears another opportunity to sell.  

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish and showing downward momentum. Slow stochastic is deep inside its oversold zone, and can trigger a pullback.

S&P 500 and FTSE 100 charts (Dec 08 '17): bulls gaining ground

S&P 500 index chart pattern

The daily bar chart pattern of S&P 500 continued its gravity-defying rally by touching another new high of 2665 on Mon. Dec 4, but formed a 'reversal day' bar (higher high, lower close). 

That triggered a brief correction down to 2624.75 on Wed. Dec 6. Bulls bought the dip once again. The index closed above 2650 with a small 0.3% gain on a weekly closing basis.

The index is trading above its three rising EMAs in a bull market. Daily technical indicators are in bullish zones. MACD and RSI are looking overbought.

Despite the relentless rise of the index and bull's 'buy the dip' strategy, strong volumes on recent down-days indicate that bears remain active. Smart money is probably booking profits. 

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 bearish 'hanging man' candlestick pattern. Weekly technical indicators are quite overbought. Slow stochastic failed to touch a new high with the index, and can trigger a correction to the rising 20 week EMA. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 oscillated about its 200 day EMA during the first four days of trading. By touching an intra-day low of 7289 on Wed. Dec 6, the index formed a small 'double bottom' reversal pattern.

On Fri. Dec 8, the index rose sharply above its 200 day and 20 day EMAs and the 7400 level with a volume surge (not shown) - only to face strong resistance from its falling 50 day EMA. It closed just below 7400, with a gain of 1.3% on a weekly  closing basis.

Daily technical indicators are showing upward momentum. MACD and Slow stochastic are rising in bearish zones. RSI has moved up to its neutral zone. 

A convincing move above the (purple) down trend line is required if bulls wish to shake off bear shackles. (At the time of writing this post, bulls are in the midst of an attempt to do so.)

On longer term weekly chart (not shown), the index bounced up to close just below its 20 week EMA, but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is below its signal line in bullish zone. RSI  and Slow stochastic are in neutral zones, and slowing slight upward momentum.