Wednesday, March 22, 2017

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

FIIs were net buyers of equity worth Rs 20.8 Billion during the first three days of trading this week. DIIs were net sellers of equity worth Rs 21.1 Billion, as per provisional figures.

Nifty had touched a lifetime high of 9218 on Fri. Mar 17, but has been in a corrective mode this week. Today, the index opened with a downward 'gap' and closed below 9050, partly filling the 85 points upward 'gap' formed on Tue. Mar 14.


There were a few technical and fundamental signs of worry for bulls that were mentioned in last week's technical update on the daily bar chart pattern of Nifty.

Though a bull market is supposed to climb a 'wall of worries', the index rarely moves in one direction. Corrections do occur, and are necessary to improve the technical 'health' of charts.

The good news for bulls is that the index is trading above its three EMAs in a bull market, and the long-term bullish structure of Nifty's chart is intact.

Daily technical indicators are in bullish zones and showing downward momentum after correcting overbought conditions. Some more correction may be on the cards.

There is a good possibility that the index will completely fill the 85 points upward 'gap' formed on Tue. Mar 14, and test support from the 8950 level.

In case 8950 gets breached on the downside, expect stronger support from the zone between 8700-8800. 

Note that the 38.2% Fibonacci retracement level of the entire rally from the Dec '16 low (of 7894) to the Mar '17 top (of 9218) is 8712. 

Remember that after correcting down to fill an upward 'gap', an index typically resumes its up move. If you were waiting for a correction to enter, this is the one to do so.

Can Nifty fall below 8700? There is no rule which says it can't. So, it may be a good idea to wait for the index to find some support and bounce up before entering.

Nifty's TTM P/E remains high at 23.45. The breadth indicator NSE TRIN (not shown) is rising in neutral zone - hinting at some more correction.

Tuesday, March 21, 2017

WTI and Brent Crude Oil charts: break down sharply below consolidation patterns

WTI Crude Oil chart


The following comments were made in the previous post on the daily closing chart pattern of WTI Crude Oil: "Oil's price is likely to correct downwards from the 'wedge'. Stronger volumes on recent down days are indicating that bears are sensing an opportunity to attack."

Daily technical indicators, which were looking bearish and showing negative divergences, had also signalled a correction. 

Oil's price broke down below the 'rising wedge' pattern and plummeted below its 200 day EMA in the space of three trading sessions - wiping out all gains made in the previous three months. 

After a brief pullback above the 200 day EMA, oil's price has once again dropped into bear territory below its three EMAs.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones and are not showing any upward momentum. 

Bears have regained control of the chart. Expect some support at 47.

On longer term weekly chart (not shown), oil's price has dropped below its 20 week EMA and is seeking support from its 50 week EMA. It closed well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Brent Crude Oil chart


The daily closing chart pattern of Brent Crude Oil broke down sharply below the 'symmetrical triangle' pattern within which it was consolidating for the previous 10 weeks.

All gains made in the previous three months were erased in three trading sessions. Oil's price has bounced up after finding good support from its 200 day EMA.

The respite from a strong bear attack may be short-lived for bulls. Daily technical indicators are close to their respective oversold zones and showing downward momentum.

Some more correction - towards 49 - is likely.

On longer term weekly chart (not shown), oil's price has dropped below its 20 week EMA and is seeking support from its 50 week EMA. It closed well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Monday, March 20, 2017

S&P 500 and FTSE 100 charts (Mar 17 '17): bears getting ready to mount another attack?

S&P 500 index chart pattern


The following was the concluding comment in last week's post on the daily bar chart pattern of S&P 500: "Weekly technical indicators are still looking overbought, and hinting at some consolidation."

The index dropped down to test support from its rising 20 day EMA for the second time in two weeks, bounced up with good volume support but drifted sideways to close with a modest 6 points gain for the week.

The rate hike by the US Fed was expected, but the dovish stance on future rate hikes disappointed bulls. The US Dollar index slipped down.

After touching a lifetime high of 2401 on Mar 1, the index has been consolidating sideways within a small 'symmetrical triangle' pattern, while trading above its three rising EMAs in a bull market.

The logical breakout from the triangle should be upwards. However, triangles tend to be unreliable patterns. The sharp volume spike on Fri. Mar 17 raises concerns of another bear attack.

Daily technical indicators have corrected overbought conditions, but giving mixed signals. All three are in bullish zones, but MACD and RSI are showing downward momentum. Slow stochastic is showing upward momentum.

Wait for a breakout above 2400 or a correction below 2350 to decide whether to buy or sell.

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 still looking overbought, and not showing any upward momentum. Expect some more consolidation or correction. 

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 moved convincingly above its previous (Mar 2) top on Thu Mar 16, and touched new lifetime intra-day (7447) and closing (7425) highs on Fri Mar 17. 

The index gained more than 1.1% for the week, and is trading well above its three rising EMAs in a bull market.

Daily technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index. A correction may be on the cards. (The index is trading about 15 points lower at the time of writing this post.)

The entire trading for the past two months has been within a large 'rising wedge' pattern from which the likely breakout is downwards. Maintain a stop-loss at 7300.

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 and their upward momentum has stalled.

Sunday, March 19, 2017

Sensex, Nifty charts (Mar 17, 2017): FII buying propels both indices to new highs

The US Fed increased interest rate by 25 bps (0.25%) last week, but hinted at only one or two more hikes this year. The dovish stance caused a dip in the US Dollar index. FIIs made merry and piled into emerging market stocks.

In a truncated trading week, FII net buying in equities crossed Rs 81.2 Billion. DIIs were net sellers of equity worth Rs 21.9 Billion, as per provisional figures.

Both Sensex and Nifty opened trading with big upward 'gaps' on Tue Mar 14, and continued to trade above the 'gaps' for the rest of the week.

After BJP's big wins in UP and Uttarakhand state elections, the government has stepped up economic reform activities, and is considering relaxation of rules for FDI in multi-brand retail

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex formed a 280 points upward 'gap' on Tue. Mar 14 (Mon. Mar 13 was a holiday) on the back of heavy FII buying that took the index above the blue up trend line.

The index continued its upward march for the rest of the week, touching a new 52 week high of 29825 on Fri Mar 17, but fell 200 points short of its lifetime intra-day high of 30025 (touched on Mar 4 '15). 

The index ended the week at a lifetime closing high of 29649, gaining nearly 2.5% for the week. Time to celebrate for bulls?

Not yet. The index has closed at a lifetime high. That means it is likely to move even higher. However, technical indicators are hinting at a pause in the rally. All four are looking overbought, and showing negative divergences by touching lower tops. A correction or consolidation is likely.

The index is trading 2200 points above its 200 day EMA. The last time the index was trading so far above its 200 day EMA was on Sep 8 '16. Technical indicators had shown negative divergences then, and a sharp correction had followed.

FII buying may take the index even higher. But some times one needs to choose between capital appreciation and capital preservation. 

Bravehearts can maintain a trailing stop-loss and enjoy the ride. Conservative investors can book partial profits.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty formed a rare weekly upward 'gap' (of 82 points) and rose to touch a new lifetime intra-day high of 9218. The index closed at a lifetime high of 9160 - gaining more than 2.5% for the week. 

Nifty is trading more than 700 points above its rising 50 week EMA. The last time it did that - in the week ending on Sep 9 '16 - a sharp correction had followed.  

Weekly technical indicators are overbought and showing negative divergences by failing to touch new highs with the index. Nifty's TTM P/E is almost at 23.8 - way higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dived back inside its overbought zone. 

An overbought market can remain overbought for long periods - specially with FIIs buying heavily. Sometimes you need to turn your paper profits into cash. This may be such a time. 

Bottomline? Bulls are in complete control of Sensex and Nifty charts. Bears have been brushed aside in an avalanche of liquidity flows. Both indices are looking quite overbought. That doesn't mean they can't move even higher. But as Falstaff had said: "The better part of valour is discretion..."

Friday, March 17, 2017

Stock Chart Pattern – SpiceJet (An Update)

Let's start with the good news first. Two years ago, Ajay Singh, the original promoter of SpiceJet, reportedly bought the debt-laden and about-to-be-shut-down company from Kalanithi Maran (of Sun TV) for Rs 2. 

The company has seen an upswing in its fortunes since then. Singh engineered a turnaround that moved the company back into the black after several years of losses. Capacity utilisation and on-time performance is one of the best in the domestic airline industry.

Lower oil (and ATF) prices helped in the turnaround. Govt's decision to revamp 50 under-utilised airports and announcement of 100% FDI in domestic airlines should further boost the growth of domestic airlines.


Now, the bad news. All is not well between Maran and Singh, with the former taking the latter to court for transgressions of their sales agreement. An adverse judgement could prove costly for the company.

More importantly - for existing and potential investors - the company's net worth is negative. It may take several years of profitable operations to clean up the balance sheet - which can be a chimera in the airline industry.



The daily bar chart pattern of SpiceJet shows that all the good news has already been discounted in the price. After touching multiple bottoms around 17 during Apr-Jun '15, the stock price shot up to touch a high of 95.30 on Jan 28 '16 - gaining a whopping 460% in 7 months.

All four technical indicators reached their overbought zones. Three of them - ROC, RSI, Slow stochastic - showed negative divergences by touching lower tops (marked by blue arrows). MACD formed a head-and-shoulders reversal pattern.

Bears used the opportunity to attack. The stock corrected more than 40% from its top, but found support at 55 near its rising 200 day EMA. That was a year ago.

Since then, the stock has been consolidating sideways in a 30 points range within a 'rectangle' pattern. The price has moved up to the top edge of the 'rectangle' for the first time since May '16. However, technical indicators are looking overbought. ROC and RSI are showing negative divergences by touching lower tops.

A 'rectangle' is usually a continuation pattern. Since the stock's price entered the 'rectangle' after a correction, the breakout should be downwards. However, a 'rectangle' is an unstable pattern. A breakout can occur in either direction. 

Since the stock is trading above its three rising EMAs in bull territory, the breakout can occur upwards as well. In fact, an attempted upward breakout today was thwarted by bears.

There is a saying about the airline industry: If you want to be a millionaire in the sector, start with a billion. Mallya and Maran have already proved the veracity of that adage.

If you are planning to enter the counter - don't. If you are an existing holder - book out. There are far better sectors to invest in. Which ones? Check out the link below:

Which sectors should you invest in?

Wednesday, March 15, 2017

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

FIIs were net buyers of equity worth Rs 52.3 Billion during the first two days of a holiday-shortened trading week. DIIs were net sellers of equity worth Rs 13.9 Billion, as per provisional figures.

Excellent performance of the ruling NDA in the state elections ensured that Nifty opened with a huge upward 'gap' on Mar 14 and touched a new lifetime high of 9123 - just managing to cross above its Mar '15 top of 9119.

However, the index failed to close above the 9100 level and formed a 'doji' candlestick pattern that indicates indecision among bulls and bears. Today, the index touched a lower top and closed slightly lower - showing a lack of follow-up buying.  


The daily bar chart pattern of Nifty is trading well above its three rising EMAs in a bull market. The 85 points upward 'gap' formed on Mar 14 is looking like an 'exhaustion gap' that can trigger a correction.

There are several signs of worry for bulls - both technical and fundamental.

All three daily technical indicators are looking overbought, and showing negative divergences by touching lower tops when the index touched a new lifetime high.

Nifty's TTM P/E has crossed above the 23.5 mark - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is in neutral zone. 

Both WPI and CPI inflation are rising. WPI rose to 6.55% in Feb '17 - its highest level in three years - from 5.25% in Jan '17. CPI rose to 3.65% in Feb '17 from 3.17% in Jan '17.

Pent-up demand due to demonetisation can increase upward pressure on prices. RBI may be forced to maintain status quo on interest rates.

US Fed's likely interest rate hike announcement should boost the US Dollar index. That may induce FIIs to book profits.

Bull markets are supposed to climb a wall of worries. But Nifty has already climbed 1220+ points (15%+) from its Dec '16 low of 7894. It may be better to err on the side of caution.

Stay on the sidelines till there is clear evidence of follow-up buying that can take Nifty to a convincing close above 9119. (Note that Sensex is still 500 points short of testing its lifetime Mar '15 high.)

Tuesday, March 14, 2017

Gold and Silver charts: bulls retreat after facing strong bear attacks

Gold chart pattern


In the previous post on the daily bar chart pattern of Gold, technical indicators were looking overbought and showing negative divergences. The combination usually triggers a correction or consolidation.

A sharp correction ensued. Gold's price dropped 70 points (to 1195) in the space of 9 trading sessions - wiping out all the gains made during Feb '17. Is the bull rally over?

It certainly appears so. All three daily technical indicators have fallen inside bearish zones. Slow stochastic is trying to recover from its oversold zone, and may initiate an upward bounce.

Note that the rally from the Dec '16 low (of 1125) to the Feb '17 top (of 1265) covered 140 points. By falling 70 points, gold's price shows an exact 50% retracement of its recent gains. 

That happens to be a Fibonacci retracement level that often demarcates a battle line between bulls and bears. In other words, a fall below 1195 will hand the advantage back to bears.

Gold's price is trading below its three EMAs in bear territory. If bulls manage to prop gold's price above 1200, they may be able to regroup and mount another rally.

An impending interest rate hike by the US Fed, which is expected to boost the US Dollar index, can put a spanner in the works.

On longer term weekly chart (not shown), gold’s price formed a 'reversal bar' (higher high, lower close) and has closed below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish, and showing downward momentum.

Silver chart pattern


The daily bar chart pattern of Silver attempted to cross above the 18.50 level on four consecutive trading sessions but failed.  All four daily technical indicators were inside their overbought zones.

That was just the opportunity that bears needed. Silver's price dropped sharply below 17 before recovering a bit. 

Silver's price is trading below its three EMAs in bear territory. The 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market.

Daily technical indicators are in bearish zones. Slow stochastic is well inside its oversold zone, and may trigger an upward bounce. Expect bears to use the opportunity to sell again.

On longer term weekly chart (not shown), silver’s price faced resistance from its 200 week EMA, and dropped to close below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking bearish and showing downward momentum.

Monday, March 13, 2017

S&P 500 and FTSE 100 charts (Mar 10 '17): corrections out of the way - new highs in sight

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 had its first decent correction in more than a month. The index received good support from its rising 20 day EMA after correcting 2% from its lifetime high of 2401.

The upward 'gap' formed on Mar 1 has been completely filled. The index is trading above its three rising EMAs in a bull market. The next leg of the up move should resume soon.

Daily technical indicators have corrected overbought conditions. MACD has crossed below its falling signal line. RSI has dropped from its overbought zone but is showing a bit of upward momentum. 

Slow stochastic has fallen below its 50% level into bearish zone, and showing negative divergence by touching a lower bottom than its Feb '17 low.

A likely increase in interest rate by the US Fed should propel the index higher.

On longer term weekly chart (not shown), the index closed lower after six straight weeks of gains, but is trading well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are still looking overbought, and hinting at some consolidation. 

FTSE 100 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "The formation of a 'doji', followed by a lower close may trigger a pullback towards the top of the 'symmetrical triangle'. The likely dip can be used to buy."

As if on cue, the index started a pullback. On Thu Mar 9, the index fell sharply below its rising 20 day EMA to touch an intra-day low of 7264 but bounced up to close 50 points higher.

Smart traders used the dip to buy. The index closed at 7343, losing just 0.4% for the week. (At the time of writing this post, the index is showing clear signs of having resumed its up move.)

Daily technical indicators have corrected overbought conditions, but remain in bullish zones. The index is trading above its three rising EMAs in a bull market.

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.

Sunday, March 12, 2017

Sensex, Nifty charts (Mar 10, 2017): look poised for corrective moves

As per provisional figures, FIIs were net buyers of equity worth Rs 59.6 Billion last week. DIIs were net sellers of equity worth Rs 32.9 Billion. 

Both Sensex and Nifty made weekly gains, but could not convincingly move above their respective Sep '16 tops.

The IIP number was 2.7% in Jan '17 against -0.1% in Dec '16, indicating that demonetisation woes are behind us. However, for the Apr '16 to Jan '17 period, cumulative IIP was only 0.6% against 2.7% a year ago. 

Car sales rose 9% in Feb '17 while 2-wheeler sales remained flat. Direct tax collections grew 10.7% YoY - thanks to RBI allowing payment of taxes in old demonetised currency.

BSE Sensex index chart pattern



The following remarks appeared in last week's post on the daily bar chart pattern of Sensex: "Some more consolidation or correction can be expected before Sensex attempts to cross above its Mar '15 lifetime high."

On Mon Mar 6, the index closed above the 29000 level for the first time since Sep 8 '16. Next day, the index touched a higher top of 29098 but closed exactly on the 29000 level - forming a small 'reversal day' bar. 

On Wed Mar 8, Sensex breached the blue up trend line and closed below it. On Fri. Mar 10, the index pulled back to the blue up trend line, where it faced strong resistance and dropped to close below 28950.

Throughout the week, the index consolidated sideways within a 300 points range and traded above its three EMAs in bull territory. However, the breach of a trend line is a red flag.

Daily technical indicators are beginning to look bearish. Three of them - MACD, RSI, Slow stochastic - are in bullish zones but showing downward momentum. ROC has dropped to seek support from its '0' line in neutral zone.

The US Fed is likely to hike interest rates again - which should propel the US Dollar index higher. That won't be good news for emerging markets, including India. 

BJP's stunning wins in UP and Uttarakhand elections and decent performance in Manipur may lead to an upward 'gap' when trading resumes on Tue. Mar 14 after Holi. That can be a good opportunity to take some profits home.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty closed 0.4% higher for the week, but with lower volume support. For the third week in a row, the index failed to close above the 8950 level.

Weekly technical indicators are looking overbought. MACD is rising above its signal line in bullish zone. RSI and Slow stochastic are moving sideways inside their overbought zone. ROC is above its rising 10 week MA but has started correcting inside its overbought zone.

The index is trading well above its two rising weekly EMAs in a bull market. Nifty's TTM P/E is above 23 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone.

News of BJP's election victory in UP and Uttarakhand may lead to an upward bounce and a possible test of the lifetime high of 9119 touched two years ago. But remember the old market adage: "Buy the rumour, sell the news."

Bottomline? Bulls are in control of Sensex and Nifty charts. But bears are expectedly putting up a fight to defend the previous (Sep '16) tops. A likely upward bounce due to BJP's good performance in recent state elections may provide the trigger for corrective moves in both indices.

Friday, March 10, 2017

How to be a successful Contrarian Investor

To be a successful contrarian investor, you need to follow Buffett's simple philosophy: Be greedy when others are fearful and be fearful when others are greedy.

In other words, a contrarian investor will look for opportunities to buy when there is blood on the streets and experts are advising that the economy will get a lot worse before it gets any better.

Likewise, a contrarian will look to book profits when the stock market is rising to new highs and everyone and his brother-in-law is offering tips on what to buy.

Simple, right? But almost impossible to follow when it is your own money on the line. The human brain seems to function irrationally when monetary transactions involve uncertain outcomes - like in the stock market.

Doing the exact opposite of what a consensus view is suggesting requires training and discipline. Knowledge of basic technical analysis tools can be of great help.

Here are some typical contrarian signals that even novice investors can learn to spot:

1. A stock's price is touching new highs, but volumes are falling
2. An index keeps rising but technical indicators are flat or falling
3. A stock's price touches a new low, but technical indicators touch higher bottoms
4. Widening distance between a stock's price and its 200 day EMA
5. An index is moving up but the number of declining stocks is more than the number of advancing stocks

The above list is not meant to be exhaustive - just indicative. 

Being able to spot certain chart patterns that indicate the opposite of what the price action is suggesting can also help a lot. E.g. a stock's price is falling but trading within a 'falling wedge' pattern indicates a likely breakout upwards.

Similarly, if a stock's price is rising but trading within a 'rising wedge', it is a signal for a correction.

Needless to say, buying or selling a stock just based on price patterns and contrarian indications is not enough. Adequate research about a company's financials and investment-worthiness should be carried out before taking any buy/sell decisions about its stock.

Also, refrain from buying or selling just because a stock has risen 20% or an index has fallen 20%. A rising stock can rise even higher, and a falling index can fall even lower.

How does one know beforehand how far a falling index will fall? What if it falls first, then rises again before falling even further?

One really can't tell beforehand. Again, some knowledge of technical analysis can be helpful. 

Those who have been regularly reading my posts know about long-term 'support-resistance' levels and Fibonacci retracement levels - and the roles these levels play time and again.

Most important of all, to be a really successful contrarian investor, you need to have oodles of patience. Waiting for the right price to buy or sell - without trying to catch the exact market bottom or top - will add several percentage points to your eventual returns.

Wednesday, March 8, 2017

Nifty chart: a midweek technical update (Mar 08 ‘17)

FIIs were net buyers of equity worth Rs 50.6 Billion during the three days of trading this week. DIIs were net sellers of equity worth Rs 32.9 Billion, as per provisional figures.

Steel exports in Feb '17 (at 0.75 MT) was up by 150% over Feb '16, but declined by 15% over Jan '17. Imports in Feb '17 (0.49 MT) was down by 46% over Feb '16 and by 19% over Jan '17.

The government is talking to almost 300 Indian and foreign companies for proposed investments of US $62 Billion, of which nearly half is expected from Chinese companies.


The daily closing chart pattern of Nifty is clearly hesitating near its previous (Sep 8 '16) top of 8953. Proximity to the psychological level of 9000 and uncertainty about the upcoming state election results on Mar 11 have kept bulls in check.

All three EMAs are rising, and the index is trading well above them in a bull market. However, for the past two weeks, the index has touched higher tops while the three daily technical indicators have touched lower tops.

The combined negative divergences can lead to some correction or consolidation. A sharp correction (4-5%) can occur if the BJP does not fare well at the polls - particularly in UP.

Nifty's TTM P/E continues to hover above 23 - well above its long term average. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone. Index upside appears limited.

(A friend - to whom I had recommended a textile exporting company back in Nov '16 - called me yesterday to say that the stock has gained 40% and asked whether it would be OK to buy at the current price. Such queries often indicate an intermediate top!)

If you are ready to jump into the market feet first, take another look at the chart. The index has gained 1100 points (~14%) in less than 3 months. This is a time for cautious optimism and partial profit booking, not euphoria.

Tuesday, March 7, 2017

WTI and Brent Crude Oil charts: still consolidating sideways due to supply glut concerns

WTI Crude Oil chart


The daily closing chart pattern of WTI Crude Oil shows a sideways consolidation with an upward bias for the past 10 weeks, and appears to have formed a 'rising wedge' pattern.

Oil's price is likely to correct downwards from the 'wedge'. Stronger volumes on recent down days are indicating that bears are sensing an opportunity to attack.

Daily technical indicators are looking bearish. MACD is sliding down below its signal line in positive zone. RSI has slipped below its 50% level. Slow stochastic has dropped to the edge of its oversold zone.

All three indicators are showing negative divergences by touching lower tops (marked by blue lines) even as oil's price touched a higher top. Some more consolidation is possible before oil's price makes a decisive move.

Oil's price is trading well above its rising 200 day EMA in a bull market. However, concerns about rising US shale oil output offsetting production cuts by OPEC and non-OPEC members have kept oil bulls on tenterhooks.

On longer term weekly chart (not shown), oil's price is trading above its rising 20 week and 50 week EMAs, but below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but not showing any upward momentum.

Brent Crude Oil chart


The daily closing chart pattern of Brent Crude Oil has been consolidating sideways within a 'symmetrical triangle' pattern for the past 10 weeks.

'Symmetrical triangle' patterns are often continuation patterns. Since oil's price formed the 'triangle' after a sharp up move, the eventual breakout from the 'triangle' should logically be upwards.

However, a 'triangle' can be unreliable. So, oil's price may correct downwards.
There is also a possibility that the price continues its consolidation and emerges sideways through the apex of the 'triangle'.

In other words, one should wait for a decisive price action before taking a buy/sell call.

Daily technical indicators are looking bearish. MACD is sliding down below its signal line in positive zone. RSI is moving sideways in neutral zone. Slow stochastic is falling towards its oversold zone.

Oil's price is trading above its rising 200 day EMA in a bull market. Production cuts by OPEC and non-OPEC countries have not removed the supply glut in the oil market, keeping oil's price range-bound.

On longer term weekly chart (not shown), oil's price is trading above its rising 20 week and 50 week EMAs, but below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones, but showing a bit of downward momentum.

Monday, March 6, 2017

S&P 500 and FTSE 100 charts (Mar 03 '17): correcting after touching new lifetime highs

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 shows that bulls are in a rampaging mood. The index consolidated sideways in a narrow 12 points range during the first two days of the week (last two days of Feb '17).

On Mar 1, the index opened with a big upward 'gap' and strong volume support. It rose to touch a new lifetime intra-day high of 2401 before correcting a bit to 2396 - a new lifetime closing high.

During the next two days, the index corrected a bit more but managed to close above 2380 on both days and partly filled the 'gap' of Mar 1.

Daily technical indicators are inside their overbought zones, but are in the process of correcting overbought conditions.

The US Fed has hinted at a hike in interest rates during Mar '17. That should strengthen the US Dollar and propel the index even higher.

The index is trading well above its three rising EMAs in a bull market. A correction is overdue and will improve the technical 'health' of the chart. But a correction doesn't happen by wishing for it.

As long as bulls are making merry, just maintain a trailing stop-loss and enjoy the ride.

On longer term weekly chart (not shown), the index closed at a new lifetime high and is trading well above its three rising weekly EMAs in a long-term bull market. All three weekly technical indicators are looking quite overbought. 

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 had been consolidating sideways within a 'symmetrical triangle' pattern after touching a high of 7354 on Jan 16 '17.

On Wed. Mar 1, the index broke out upwards from the 'triangle' with a volume surge and touched a new lifetime high of 7383. 

The next day, it rose even higher to touch a new lifetime high of 7395, but closed just below its opening level of 7383 to form a 'doji' candlestick pattern (which indicates hesitation among bulls and bears).

On the last day of the week, the index dropped to test support from its Jan 16 top but bounced up to close at 7374 - gaining 1.8% on a weekly closing basis.

The formation of a 'doji', followed by a lower close may trigger a pullback towards the top of the 'symmetrical triangle'. The likely dip can be used to buy.

Daily technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index. Some correction or consolidation is likely.

On longer term weekly chart (not shown), the index has closed at a new lifetime high and is trading well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought and showing negative divergences.

Sunday, March 5, 2017

Sensex, Nifty charts (Mar 03, 2017): consolidating after touching 52 week highs

During the first three trading days of Mar '17, FIIs were net buyers of equity worth Rs 14.5 Billion. For the month of Feb '17, FIIs were net buyers of equity (worth Rs 87 Billion) after four months of net selling.

DIIs were net sellers of equity worth Rs 5.7 Billion during Mar 1-3, '17 as per provisional figures. Sensex and Nifty touched 52 week highs, but closed lower for the week.

Nikkei India Services PMI rose to 50.3 in Feb '17 against 48.7 in Jan '17. That helped the Composite PMI (Manufacturing + Services) to move above 50, indicating growth.

BSE Sensex index chart pattern



A 'shooting star' candlestick pattern, observed in last week's post on the daily bar chart pattern of Sensex, had hinted at a correction/consolidation and a test of support from the blue up trend line.

The index consolidated sideways and touched a 52 week high of 29146 on Mar 2, but closed much lower to form a 'reversal day' bar (higher high, lower close). 

On Fri. Mar 3, the index bounced up after testing support from the up trend line but closed about 60 points lower for the week. All three EMAs are rising, and the index closed above them in a bull market.

Daily technical indicators have corrected overbought conditions, but remain in bullish zones. All four are showing negative divergences by failing to touch new highs with the index.

Some more consolidation or correction can be expected before Sensex attempts to cross above its Mar '15 lifetime high.

(The entire trading from Sep '16 onwards has formed a 'cup'-like pattern. Any corrective move that breaches the blue up trend line may form the 'handle' of a 'cup-and-handle' pattern, and drop the index to the 27500-28250 zone.

Should such a pattern get formed - and there are no indications as yet that it will - the subsequent rally can be explosive and propel the index above 32000.)

If you are sitting on gains in small-cap stocks, this can be a good time to book partial profits.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty touched a new 52 week high of 8992.50, but closed lower for the week after 5 straight weeks of higher closes. 

In the process, it formed a 'reversal week' bar (higher high, lower close) that can trigger some more correction or consolidation.

Weekly technical indicators are looking overbought. RSI and Slow stochastic are showing signs of correcting from their overbought zones.

Nifty's TTM P/E is above the 23 mark - well above its long-term average. The breadth indicator NSE TRIN (not shown) is inside its overbought zone.

The Q3 (Dec '16) GDP figure came as a positive surprise for the stock market, but the veracity of the calculation is under question due to a rather convenient downward adjustment to the Q3 (Dec '15) GDP number.

Despite the improvement in the Manufacturing and Services PMI numbers, the economy is still struggling to recover from the demonetisation shock. The government hasn't helped matters by keeping mum on the extent of 'black money' recovered by the demonetisation process.

Bottomline? Bulls are in control of Sensex and Nifty charts. However, bears might put up a fight before surrendering. Any strong correction - should it come - may be the last opportunity to buy before bulls run away with this market.

Friday, March 3, 2017

Stock Chart Pattern: Akzo Nobel (ICI) India – An Update

The Indian paints industry is dominated by Asian Paints - with more than 50% market share. Akzo Nobel (formerly ICI) India is an 'also ran' with 11% market share - behind Berger Paints (19%) and Kansai Nerolac (15%).

So, what is the investment rationale for this company? It is part of the largest paints and coatings company in the world, and has been gradually rationalising its India operations and slowly gaining market share.

Valuation looks more attractive than its larger competitors. Through organic (greenfield and brownfield) as well as inorganic expansions, the company has been growing at a 20% CAGR over the past 5 years (against an industry average of 12%).



The daily bar chart pattern of Akzo Nobel India had completed a large 'double bottom' reversal pattern around 1200 in Feb '16, and rallied strongly  to touch a lifetime high of 1740 on Aug 31 '16.

Note that all four daily technical indicators showed negative divergences (marked by blue arrows) by touching lower tops while the stock touched its lifetime high.

Over the next two months, a 'triple top' reversal pattern was formed. That initiated a correction which was exacerbated be Modi's demonetisation announcement in Nov '16.

The stock price dropped sharply below its three EMAs into bear territory, and touched a low of 1375 on Nov 23 '16. After some sideways consolidation, it dropped even lower to 1328 on Jan 16 '17.

Note that three of the technical indicators - MACD, ROC, RSI - showed positive divergences (marked by blue arrows) by touching higher bottoms while the stock price dropped lower.

That was a trigger for the stock to start its recovery. Resistance from the long-term 'support-resistance' level of 1460 has been overcome. The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

The stock may consolidate or correct a little before resuming its up move. The company has a history of strong cash flows and good dividend payments. Patient investors can think about adding it to their portfolios.

Wednesday, March 1, 2017

Nifty chart: a midweek technical update (Mar 01 ‘17)

For the month of Feb '17, FIIs and DIIs were both net buyers of equity, as per provisional figures. FII net buying crossed Rs 87 Billion; DII net buying was worth Rs 9.3 Billion.

(Those figures were skewed by a single day's buying and selling on Feb 17 '17, when a removal of cap on FII buying in HDFC Bank led to FII net buying of Rs 80 Billion and DII net selling of Rs 56 Billion.)

Q3 (Dec '16) GDP growth was 7% - lower than 7.4% in Q2 (Sep '16), but much higher than the 6.4% figure that economists had predicted due to the after-effects of demonetisation.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 50.7 in Feb '17 from 50.4 in Jan '17. The strong GDP and PMI numbers may put the brakes on any further interest rate cuts by RBI.



The daily bar chart pattern of Nifty rose 0.75% today after two days of correction, and closed at a new lifetime high of 8946. Bulls were active after hearing good news on the GDP and Manufacturing PMI data fronts. 

All three EMAs are rising, and the index is trading above them in a bull market. For the past two months, every dip in the index has been used to buy - keeping bears on the back foot.

Daily technical indicators have corrected overbought conditions but remain in bullish zones - leaving the door open for higher levels on the index.

Nifty's TTM P/E has remained above 23 for the past month, which is much higher than the long-term average. The breadth indicator NSE TRIN (not shown) is inside its overbought zone - but some more upside can't be ruled out entirely.

Near a previous top, the outlook should be cautiously optimistic. The time to buy by the truckload passed two months back. Be very selective in your current buying.