Monday, December 31, 2018

S&P 500 and FTSE 100 charts (Dec 28, 2018): pullback after touching new lows

S&P 500 index chart pattern


The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "A spike in trading volumes is possibly an indication of a 'selling climax'. A technical bounce may follow." 

After closing below the lower Bollinger Band at 2351 on Dec 24 - a 20% correction from the (Sep 21) top of 2941 that confirms a bear market - the index recovered strongly on Boxing Day. 

It first touched a new low of 2347, and then recovered 121 points to close at 2468. Formation of a 'reversal day' bar (lower low, higher close) encouraged bulls to embark on a pullback rally that touched the holiday-shortened week's high of 2520 on Fri. Dec 28. 

The index closed with a weekly gain of 69 points (2.9%), but formed a small 'reversal day' bar (higher high, lower close) that may bring the pullback rally to an end. The index is trading well below its 200 day EMA in a bear market. 

Daily technical indicators are correcting oversold conditions. MACD is rising towards its falling signal line inside its oversold zone. RSI and Slow stochastic have emerged from their respective oversold zones. Bears are likely to use the pullback to sell.

On longer term weekly chart (not shown), the index dropped below its 200 week EMA intra-week, but bounced up to close higher, forming a 'reversal' bar. Weekly technical indicators are looking oversold. MACD is falling inside its oversold zone. RSI has bounced up from the edge of its oversold zone. Slow stochastic has turned up inside its oversold zone.

FTSE 100 index chart pattern



In a X'mas-holiday shortened trading week, the daily bar chart pattern of FTSE 100 touched a 2 years low of 6536 on Thu. Dec 27, but a pullback rally enabled a 13 points gain for the week.

The index continues to trade below its three falling EMAs in a bear market. Any attempt by bulls to progress further is likely to face more bear selling. Expect volatility to continue till the BrExit issue is settled.

Daily technical indicators are turning bullish. MACD is moving up towards its sliding signal line in bearish zone. RSI is rising towards its 50% level. Stochastic has climbed above its 50% level

On longer term weekly chart (not shown), the index fell to a 2 years low before a sharp pullback to close above 6700. It remains well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are bearish. MACD is falling inside its oversold zone. RSI is hovering near the edge of its oversold zone. Stochastic is trying to emerge from its oversold zone, hinting at some index upside.

Sunday, December 30, 2018

Sensex, Nifty charts (Dec 28, 2018): trading within bearish rising wedge patterns

In a holiday-shortened trading week, FIIs were net sellers of equity on Mon. & Fri. (Dec 24 & 28), but net buyers on Wed. & Thu. (Dec 26 & 27). Their total net buying was worth Rs 11.1 Billion. DIIs were net buyers of equity on Mon. & Fri., but net sellers on Wed. & Thu. Their total net buying was worth Rs 5.85 Billion, as per provisional figures.

India's fiscal deficit during Apr-Nov '18 touched Rs 7.16 Trillion, which is 114.8% of full year target. During Apr-Nov '17, fiscal deficit was 112% of full year target. No wonder RBI is being pressurised to part with a portion of its reserves to help trim the deficit.

Reports that the government would inject Rs 286 Billion through recapitalisation bonds for 7 PSU banks to help them come out of RBI's PCA framework brought some bullish cheer to PSU bank stocks.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex closed above its three EMAs in bull territory with a 1% gain for the week. The index had dropped below its three EMAs to touch an intra-day low of 35011 on Dec 26, but formed a 'reversal day' bar (lower low, higher close) - just as it had done a fortnight earlier - and bounced up.

Will the 'Santa rally' continue next week? For the past 11 weeks, the index has been trading within a bearish 'rising wedge' pattern, from which a downward breakout is expected. So, bulls should keep their enthusiasm in check.

Daily technical indicators are looking bullish to neutral. MACD is oscillating about its signal line in bullish zone. ROC has slipped below sliding 10 day MA in neutral zone. RSI is oscillating about its 50% level. Slow stochastic has fallen from its overbought zone, but showing a bit of upward momentum.

Q3 (Dec '18) results of India Inc. will start hitting the market around mid-Jan '19. Results are not expected to be much better than in Q2 (Sep '18). 

US-China trade war, possible BrExit-led recession, likely slowdown in global growth, general elections in India are near-term concerns for the stock market. Be very choosy in what you buy.

NSE Nifty index chart pattern




The weekly bar chart pattern of Nifty has been trading within a bearish 'rising wedge' pattern for the past 11 weeks. The likely breakout from the 'wedge' is downwards.

The Fibonacci support zone should provide near-term support. However, a fall towards the 200 week EMA can't be ruled out, if US-China trade talks do not yield expected results.

Weekly technical indicators are turning bullish. MACD is merging with its signal line in bearish zone. RSI is moving up towards its 50% level. Slow stochastic has crossed above its 50% level. ROC is about to enter its overbought zone

Nifty's TTM P/E has moved up to 26.16, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped deep inside its overbought zone, and can trigger a correction.

Bottomline? Sensex and Nifty charts are consolidating within bearish 'rising wedge' patterns. Likely breakouts from such patterns is downwards. Expect both indices to touch lower levels before they can rise to touch new highs in 2019. 

Saturday, December 29, 2018

4 Ways To Survive and Prosper in a Bear Market

A bear market for stocks could be coming.  After a nine-year bull market, there is always the chance that a bear market could be right around the corner.  The problem is, it can be hard to know when it’s coming, how long it will last or how severely it will impact stock prices.  

So it’s always safe to say that a bear market is coming…eventually.  And it’s always good to know some of the precursors and ways to hedge.

There is no reason to be alarmed.  Not only can you survive the next bear market, you can even prosper from it.  Below are some techniques you can use to either reduce your portfolio losses or even to make some money off the big bad bear. 

Read more at:
https://www.investopedia.com/articles/investing/070115/4-ways-survive-and-prosper-bear-market.asp

Wednesday, December 26, 2018

Nifty chart: a midweek technical update (Dec 26, 2018)

FIIs were net sellers of equity on Mon. (Dec 24) but net buyers on Wed. (Dec 26) after the X'mas break. Their total net selling was worth Rs 5.0 Billion. DIIs were net buyers on Mon. but net sellers on Wed. Their total net buying was worth Rs 0.5 Billion, as per provisional figures.

India's low retail inflation is mainly due to food inflation falling to its lowest level since 2014. That directly relates to rural distress, because farmers are not getting adequately remunerated. No wonder they are angry, and voted against the ruling NDA in the recent state elections.



The daily bar chart pattern of Nifty shows a smart pullback from the lower Bollinger Band today, after Monday's sharp fall below the three EMAs into bear territory.

The index moved above its 200 day EMA and closed at its 50 day EMA - forming a 'reversal day' bar (lower low, higher close) - but stayed below its 20 day SMA (blue dotted line), which is the 'middle band' that sort of acts as the mid-point between the upper and lower Bollinger Bands.

The respite for bulls may be temporary. The closing/line chart of Nifty (below) shows the formation of a bearish 'rising wedge' pattern from which the likely index breakout is downwards.



Daily technical indicators are looking bearish to neutral. MACD has crossed below its signal line in bullish zone. RSI is facing resistance from its 50% level after slipping below it. Slow stochastic is falling rapidly towards its 50% level.

Nifty's TTM P/E has moved down to 25.96 - but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone - hinting at limited near-term index upside.

Prospects of a 'Santa rally' (during the period Dec 24 to Jan 2) appear bleak.

Tuesday, December 25, 2018

WTI and Brent Crude Oil charts: bottoms fall out as bear onslaught continues

WTI Crude Oil chart


The following comment was made in the previous post on the daily bar chart pattern of WTI Crude Oil: "Expect bears to remain in control despite the OPEC production cut because of demand slow down."

Though the 'death cross' (marked by grey ellipse) had technically confirmed a bear market, bulls tried for the better part of two weeks to put a floor on oil's price at 50. 

Strong resistance from the plummeting 20 day EMA proved insurmountable. The temporary support at 50 was breached. Oil's price dropped sharply to close at 46.24 on Tue. Dec 18.

That was a signal for bulls to turn tail and run. Oil's price dropped to its lowest level in 18 months, and closed below 43.

Daily technical indicators are looking oversold and showing downward momentum. Slow stochastic is falling deeper inside its oversold zone. MACD and RSI are showing positive divergences by touching higher lows inside their respective oversold zones.

Some price consolidation can be expected, as bulls may try to defend the long-term support/resistance level of 42. If 42 gets breached, oil's price can drop towards 38.

On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are falling inside their respective oversold zones. The impending 'death cross' of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil shows the failure of a determined effort by bulls to defend the support level of 58. Strong resistance from the falling 20 day EMA put paid to bullish hopes.

Oil's price fell steeply to close below 51 - a level last touched back in Aug '17. Bears may not be done yet. If the long-term support at 50 gets breached, oil's price can drop to 45.

Daily technical indicators are showing downward momentum inside oversold zones. MACD and RSI are showing positive divergences by touching higher bottoms inside their respective oversold zones. Some price consolidation or pullback may be on the cards.

On longer term weekly chart (not shown), oil's price closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are falling inside their respective oversold zones. The 'death cross' of the 50 week EMA below the 200 week EMA will technically confirm a return to a long-term bear market.

Monday, December 24, 2018

S&P 500 and FTSE 100 charts (Dec 21, 2018): bears have total control

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 shows how technical analysis signals can sometimes be self-fulfilling. The index made a strong 62% gain (~1131 points) during its 33 months long rally from the Feb 11 '16 low of 1810.10 to the Sep 21 '18 top of 2940.91.

Almost half of those gains (532.36 points; 47%) got wiped out in just 3 months when the index touched an intra-day low of 2408.55 on Dec 21 '18. Note how the bottom seems to have fallen out of the index after the bearish 'death cross' (of the 50 day EMA below the 200 day EMA) on Dec 10th.

Daily technical indicators are looking oversold. MACD is falling deep inside its oversold zone. RSI is also falling inside its oversold zone. Slow stochastic has dropped well inside its oversold zone. Bears have taken complete control of the chart.

The 50% Fibonacci retracement level of the 33 months long rally (from Feb '16 low to Sep '18 top) is at 2375. Expect bulls to put up a fight to defend that level. But the fight may not last long when bears are on the rampage.

On longer term weekly chart (not shown), the index dropped to test support from its 200 week EMA for the first time since Feb '16. A spike in trading volumes is possibly an indication of a 'selling climax'. A technical bounce may follow. Weekly technical indicators are looking oversold and showing negative divergences by falling below their Feb '16 lows. 

FTSE 100 index chart pattern



The daily bar chart pattern of FTSE 100 continued its corrective move, and touched a 2 years low of 6646 on Thu. Dec 20 but managed to close above 6700. 

On Fri. Dec 21, the index formed an 'inside day' candlestick pattern (lower high, higher low) - which indicates indecision among bulls and bears - and closed slightly higher. On a weekly closing basis, the index lost 124 points (1.8%).

BrExit uncertainty is increasing by the day, and the British PM's prospects of getting her BrExit deal through Parliament are looking bleak.

Daily technical indicators are bearish. MACD is sliding down below its signal line in bearish zone. RSI is falling below its 50% level. Stochastic is inside its oversold zone

All three indicators showed positive divergences by not falling lower with the index. But don't expect a rally anytime soon, as bears are selling on every rise.

On longer term weekly chart (not shown), the index closed below its three weekly EMAs in long-term bear territory, but appears to have found temporary support at 6700. Weekly technical indicators are bearish and showing downward momentum. MACD and Stochastic are falling inside their respective oversold zones. RSI is seeking support from the edge of its oversold zone.

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

Sunday, December 23, 2018

Sensex, Nifty charts (Dec 21, 2018): bears stamp their authority once again

FIIs were net sellers of equity on Mon. & Thu. (Dec 17 & 20), but net buyers on the other three days of the week. Their total net buying was worth Rs 10.4 Billion. DIIs were net buyers of equity on Thu. (Dec 20), but net sellers on the other four days. Their total net selling was worth Rs 11.4 Billion, as per provisional figures.

Equity mutual fund schemes registered a lower net inflow of Rs 84.14 Billion in Nov '18, compared to Rs 126.22 Billion in Oct '18 and Rs 111.72 Billion in Sep '18, mainly due to a volatile market. During the Apr-Nov '18 period, total inflow into equities have exceeded Rs 822 Billion. 

S. Naren, who manages Rs 3.1 Trillion as CIO of ICICI Pru AMC, says investors need to brace for a run of constrained returns that will last until the US Fed makes a policy U-turn. For 2019, Naren doesn't see investments in Indian equities fetching more than 'mid-teen' percentage gains. 

BSE Sensex index chart pattern



Note the following cautionary comments from last week's post on the daily bar chart pattern of Sensex: "... (bulls) have still not been able to extricate themselves from the medium-term down trend that started on Aug 29... Anyone holding long positions should think of taking some profits home."

The index rose to touch an intra-day high of 36555 on Wed. Dec 19 - its highest level since Oct 3 (the day before it had formed a downward 'gap' and dropped into bear territory). However, it continued to face resistance from the (blue) up trend line  that was breached on Dec 6.

Even as Sensex touched its highest level in more than 10 weeks, MACD and RSI showed negative divergences by failing to rise higher with the index. ROC reached the edge of its overbought zone. Slow stochastic re-entered its overbought zone. Bears took advantage of technical weakness visible on the chart.

The index closed around 50 points lower on Thu. Dec 20, and then plunged head-first below its 20 day EMA and the downward 'gap' (formed on Oct 4) on Fri. Dec 21 - perhaps a belated reaction to US Fed's 25 bps (0.25%) interest rate increase, but in tandem with the sharp fall in US markets.

Sensex closed above its 50 day and 200 day EMAs in bull territory, but lost about 220 points (0.6%) on a weekly closing basis. A single day's trading on Fri. Dec 21 wiped out all gains made during the previous 6 trading sessions. 

Daily technical indicators are looking bearish and showing downward momentum. MACD is poised to cross below its signal line in bullish zone. ROC has dropped to seek support from its sliding 10 day MA in neutral zone. RSI has fallen below its 50% level. Slow stochastic is ready to fall from its overbought zone.

A curtailed trading week due to X'mas holiday plus F&O expiry should keep trading activity muted. Expect bears to try and press home their advantage.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty touched an intra-week high of 10985 - its highest level in 11 weeks - but formed a 'reversal' bar (higher high, lower close) and closed just below its 20 week EMA.

The index closed above its 50 week EMA and well above its 200 week EMA in a long-term bull market, but lost about 50 points (0.5%) on a weekly closing basis - thanks to the sharp correction on Fri. Dec 21. 

The index appears to be trading within a bearish 'rising wedge' pattern for the past 10 weeks. (The pattern is more clearly visible on the daily and weekly closing/line charts.) The likely breakout from the 'wedge' is downwards.

Three of the weekly technical indicators remain in bearish zones - MACD is moving sideways with slight upward bias below its signal line; RSI is moving sideways above its oversold zone; Slow stochastic is moving sideways just below its 50% level. ROC is above its 10 week MA in bullish zone, but has turned down. 

Nifty's TTM P/E has slipped to 26.02 (after touching a mid-week high of 26.53), which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped to the edge of its overbought zone, hinting at near-term index downside.

Bottomline? Despite valiant effort by bulls, Sensex and Nifty charts appear to be transitioning to bear markets. Increased volatility during intra-day trading is a sign of the balance shifting towards bears. Both indices are likely to fall lower before they can rise to touch new highs in 2019. 

Friday, December 21, 2018

Key Financial Ratios to Analyze Healthcare Stocks

The Healthcare Sector is one of the largest market sectors, encompassing a variety of industries such as hospitals, medical equipment and the pharmaceutical industry. The sector is popular among investors for two very different reasons.

First, it is viewed by many investors as containing stable industries that offer a good defensive play to help weather general economic or market turn-downs. Regardless of the state of the economy, individuals continually need healthcare. 
Read more at:

Wednesday, December 19, 2018

Nifty chart: a midweek technical update (Dec 19, 2018)

FIIs were net sellers of equity on Mon. (Dec 17) but net buyers on Tue. & Wed. (Dec 18 & 19). Their total net buying was worth Rs 12.9 Billion. DIIs were net sellers on all three days. Their total net selling was worth Rs 7.4 Billion, as per provisional figures.

Hong Kong based billionaire businessman Victor Fung has said that India has a window of opportunity in the midst of US-China trade war. The trade imbalance between China and India will get corrected as Chinese consumption of Indian goods increases.

Due to demonetisation, the cost of printing currency notes escalated to Rs 79.65 Billion in FY 2016-17 from Rs 34.21 Billion in FY 2015-16, as per a written reply to the Rajya Sabha by the Finance Minister.


FII buying extended the counter-trend rally on the daily bar chart pattern of Nifty. The index had consolidated inside the Oct 4 downward 'GAP' on Thu. & Fri. (Dec 13 & 14). On Mon. Dec 17, it moved above the 'GAP' once again and rose further to close at 10967 today - its highest close since Oct 1.

The 20 day and 50 day EMAs are above the 200 day EMA, and the index is trading above all three EMAs in bull territory. Analysts have started predicting new highs for the index. Small-cap and mid-cap stocks have started to move up, which is a sign of participation by retail investors.

Bulls should keep their celebrations on hold, as they still have a lot of work left before they can regain control of the chart. Fundamentally, the market has received a sentiment boost due to the sharp fall in oil prices, and a consequent strengthening of the Rupee against the US Dollar.

That is not the only reason for FII buying. This is the time for annual 'NAV  management'. Foreign funds tend to buy beaten down index stocks to increase their year-end NAVs. Their buying may not sustain for long.

There are technical headwinds as well. Daily technical indicators are in bullish zones, but MACD and RSI are showing negative divergences by touching lower tops. Slow stochastic is well inside its overbought zone, and can trigger a correction. 

Note that the index is trading inside a 'resistance zone' between 10882 and 11090, which are the 50% and 61.8% Fibonacci retracement levels respectively of the 1756 points fall from the Aug 28 top (11760) to the Oct 26 low (10004). Only a convincing index move above 11090 can restore control to bulls.

Nifty's TTM P/E has moved up to 26.53 - its highest level since Oct 1, and much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is plummeting in neutral zone and can limit near-term index upside.

On the daily closing/line chart (not shown), Nifty is trading within a large bearish 'rising wedge' pattern, with the upper edge of the 'wedge' near 11000. Expect bears to start selling as the index approaches 11000.

Falling oil prices and lower inflation may be great for Indian consumers, but may not be good indicators of economic growth. If you are holding long positions, taking some profits home may be a good idea.

Tuesday, December 18, 2018

Gold and Silver charts: bulls showing courage and determination

Gold chart pattern


The following remarks were made in the previous post on the daily bar chart pattern of Gold: "Some near-term upside is likely. Gold's price needs to move convincingly above its 200 day EMA and the 1280 level for bulls to regain control of the chart."

Bulls have showed real courage and determination. Gold's price first crossed above the 'support/resistance zone' between 1230 & 1240 with decent volume support, and then moved above its 200 day EMA.

Volumes petered off and gold's price slipped below its 200 day EMA, but bounced up after receiving support from its rising 20 day EMA. Gold's price has closed above its three EMAs in bull territory after 8 months, but bears have not yet relinquished control.

Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD is moving sideways above its rising signal line. RSI is above its 50% level. Slow stochastic has fallen down from its overbought zone.

Expect gold's price to consolidate around current level for some time before it makes an attempt to cross above the next 'support/resistance zone' between 1260 & 1270.

On longer term weekly chart (not shown), gold’s price moved above its 20 week EMA, but faced resistance from its 50 week EMA and closed below its 200 week EMA in long-term bear territoryWeekly technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI has crossed above its 50% level. Slow stochastic is inside its overbought zone, and can trigger a near-term consolidation/correction.

Silver chart pattern



The following remarks were made in the previous post on the daily bar chart pattern of Silver"Some more near-term upside is likely. Expect strong resistance from the zone between 15.0 and 15.25."

Silver's price rallied to touch an intra-day high of 14.90 on Thu. Dec 13, but sliding volumes ensured failure to test resistance from the 'support/resistance zone'. Bears used the opportunity to sell. Silver's price dropped to seek support from its entangled 20 day and 50 day EMAs.

Daily technical indicators are in bullish zones but are not showing much upward momentum. MACD is above its rising signal line. RSI is above its 50% level. Slow stochastic is sliding down inside its overbought zone.

Expect silver's price to consolidate around current level for some time before bulls can make a realistic attempt to cross above the 'support/resistance zone' and the 200 day EMA. 

On longer term weekly chart (not shown), silver’s price faced resistance from its 20 week EMA and closed below its 50 week and 200 week EMAs in a long-term bear marketWeekly MACD and RSI are in their respective bearish zones, but showing upward momentum. Slow stochastic is rising towards its overbought zone.

Monday, December 17, 2018

S&P 500 and FTSE 100 charts (Dec 14, 2018): bears tighten their strangleholds

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: "The strong index volatility during the past two months is an indication of a transition from a bull to a bear market...The impending 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market."

What had appeared inevitable has happened - despite a valiant effort by bulls. The 'death cross' of the 50 day EMA below the 200 day EMA (marked by light grey ellipse) has technically confirmed that the index has fallen into a bear market.

The index had dropped below the lower Bollinger Band to an intra-day low of 2583 on Mon. Dec 10 - only to bounce up and close 5 points higher than Friday's close, forming a 'reversal day' bar (lower low, higher close).

That triggered a brief pullback rally. The index touched an intra-day high of 2685 on Wed. Dec 12, but again faced resistance from the falling 20 day SMA (blue dotted line). Bears tightened their stranglehold. The index dropped to the lower Bollinger Band on Fri. Dec 14 before bouncing up to close just below 2600 - losing 1.25% on a weekly closing basis.

Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in bearish zone. RSI is falling below its 50% level. Slow stochastic has bounced up weakly after receiving support from the edge of its oversold zone. Expect bears to continue their 'sell on rise' strategy.

The US economy appears to be in peak shape. So, why has the index slipped into a bear market? It is quite elementary (as Sherlock Holmes would often say). The stock market rises and falls in a cyclical fashion that often 'leads' the economic cycle by several months

On longer term weekly chart (not shown), the index closed below its sliding 20 week and 50 week EMAs, but above its 200 week EMA in a long-term bull market. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. RSI is falling after facing resistance from its 50% level. Slow stochastic is poised to fall inside its oversold zone.

FTSE 100 index chart pattern



The daily bar chart pattern of FTSE 100 had touched a 2 years low of 6674 on Thu. Dec 6. A pullback rally followed. The index touched an intra-day high of 6908 on Thu. Dec 13, but faced strong resistance from its falling 20 day EMA.

Bears sold the rise. The index slipped down below 6850 to close with a weekly gain of 1%. All three EMAs are falling. FTSE is trading below them in a bear market.

The British PM won a trust vote in Parliament but is struggling to build consensus on her BrExit deal. The uncertainty is helping bears to tighten their grip on the chart.

Daily technical indicators are looking bearish. MACD is facing resistance from its falling signal line in bearish zone. RSI failed to move above its 50% level, and has turned down. Stochastic also failed to move above its 50% level. Some more correction is likely. 

On longer term weekly chart (not shown), the index bounced up a bit but closed below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line. RSI has received support from the edge its oversold zone. Stochastic is trying to emerge from its oversold zone.

Sunday, December 16, 2018

Sensex, Nifty charts (Dec 14, 2018): bulls refusing to accept bear dominance

FIIs were net buyers of equity on Mon., Thu. & Fri. (Dec 10, 13 & 14), but net sellers on the other two days of the week. Their total net selling was worth Rs 20.7 Billion. DIIs were net buyers of equity on Tue. & Wed. (Dec 11 & 12), but net sellers on the other three days. Their total net buying was worth Rs 28.8 Billion, as per provisional figures.

India's WPI-based inflation fell to a three months low of 4.64% in Nov '18 from 5.28% in Oct '18 - mainly due to a decline in food and fuel prices. WPI was 4.02% in Nov '17.

Exports grew only 0.8% to US $26.5 Billion in Nov '18, while imports grew 4.31% to US $43.17 Billion. Trade deficit widened to US $16.67 Billion. During Apr-Nov '18, trade deficit was US $128.13 Billion against US $106.37 Billion during Apr-Nov '17.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex faced sharp sell-offs on Mon. Dec 10 and the early part of Tue. Dec 11, as state election results indicated victory of Opposition parties in all five states.

The index closed below its three EMAs in bear territory on Mon., and touched an intra-day low of 34426 on Tue. before pulling back towards its 200 day EMA. The formation of a 'reversal day' bar (lower low, higher close) encouraged bulls to go on the offensive.

On Wed. Dec 12, the index vaulted above its three EMAs into bull territory but faced resistance from the downward 'gap' formed on Oct 4. It turned out to be a temporary halt. On Thu. Dec 13, the index hopped across the 'gap', but pulled back towards it by close - after facing strong resistance from the (blue) up trend line.

Sensex failed to make further progress on Fri., but closed above the 'gap' and the three EMAs in bull territory with a weekly gain of 289 points (0.8%). Bulls won the week's battle, but have still not been able to extricate themselves from the medium-term down trend that started on Aug 29.

Daily technical indicators are looking bullish to neutral. MACD is facing resistance from its signal line in bullish zone. ROC is below its falling 10 day MA in neutral zone. RSI is falling towards its 50% level. Slow stochastic is rising towards its overbought zone.

After losing face in state elections, BJP stalwarts came out in force to tom-tom the supposed 'clean chit' given by the Supreme Court to the Rafale aircraft deal. Turns out the 'clean chit' was based on disguised information provided to the court by the Govt., which is tying itself in knots in trying to prevent deal details from becoming public before the general elections next year.

How the stock market reacts to the disclosures will be revealed next week. Don't expect bears to be in wait-and-watch mode. Anyone holding long positions should think of taking some profits home.

NSE Nifty index chart pattern



The following comment was made in last week's post on the weekly bar chart pattern of Nifty: "A likely fall below the 50 week EMA will bring the support zone between 10283 and 9827 back into the picture." 

The index dropped well below its 50 week EMA and touched an intra-week low of 10333 - which was just 50 points above the support zone. However, Nifty recovered to close above its 20 week and 50 week EMAs in bull territory - gaining 111 points (1%) on a weekly closing basis.

Three of the weekly technical indicators are in bearish zones - MACD is moving sideways with slight upward bias below its falling signal line; RSI is moving sideways above its oversold zone; Slow stochastic is moving up towards its 50% level. ROC is rising sharply towards its overbought zone after crossing above its 10 week MA. 

Nifty's TTM P/E has moved up to 26.14, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone. Some near-term index upside is possible.

Bottomline? Sensex and Nifty charts seem to be transitioning to bear markets. Increased volatility during intra-day trading is a sign of the balance tilting in favour of bears. Ignore the bullish targets being given by a few analysts. Both indices are likely to go lower before they go much higher. 

Friday, December 14, 2018

Warren Buffett: How He Does It

Buffett follows the Benjamin Graham school of value investing. Value investors look for securities with prices that are unjustifiably low based on their intrinsic worth.

There isn't a universally accepted way to determine intrinsic worth, but it's most often estimated by analyzing a company's fundamentals. 

Like bargain hunters, the value investor searches for stocks that they believe are undervalued by the market, or stocks that are valuable but not recognized by the majority of other buyers.

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