Wednesday, January 17, 2018

Nifty chart: a midweek technical update (Jan 17, 2018)

During the first three days of trading this week, FIIs turned bulls once again. Their net buying in equities touched Rs 13.5 Billion. DIIs were net sellers of equity worth Rs 2.5 Billion, as per provisional figures.

WPI inflation was lower than anticipated at 3.6% in Dec '17 compared to 3.9% in Nov '17. Falling fruit and vegetable prices were main reasons for the lower number.

India's trade deficit was at its widest in 3 years in Dec '17, as a surge in gold and oil imports offset rising exports. Imports increased by 21.1% to $41.9 Billion. Exports increased 12.4% to $27 Billion. 

The daily bar chart pattern of Nifty had formed a 23 points upward 'GAP' on Jan 8. Some bullish and bearish technical possibilities were discussed in last week's post, with the scales tipping towards the bearish side.

Support from the 'GAP' was successfully tested twice last week - on Wed. Jan 10 and Fri. Jan 12. On Mon. Jan 15, the index opened with another upward 'gap' that was quickly filled during Tuesday's correction.

Bulls went on a rampage today. What changed the bearish outlook? News that the govt. will borrow an additional Rs 200 Billion this financial year (ending Mar '18) instead of Rs 500 Billion planned earlier may have acted as a catalyst.

FIIs and DIIs combined forces to buy equity shares today. However, the total number of advancing shares was matched by the total number of declining shares. That means bears are refusing to give up.

Nifty crossed the 10800 level intra-day for the first time ever, and is trading well above its three rising EMAs in a bull market. Daily technical indicators are in their overbought zones. MACD is showing upward momentum. Slow stochastic is showing negative divergence by touching lower tops as the index has moved higher.

Nifty's TTM P/E is at 27.18 - much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling rapidly inside its overbought zone - and can limit index upside. 

Hind. Unilever declared excellent Q3 (Dec '17) results after trading hours today. That may boost bullish fervour tomorrow.

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