Saturday, March 3, 2018

Sensex, Nifty charts (Mar 01, 2018): consolidating sideways within triangle patterns

During Feb '18, FIIs were net sellers of equity worth Rs 186.2 Billion, as per provisional figures. It was their heaviest monthly net selling since Sep '17. 

DIIs almost matched them with net buying of equity worth Rs 178.1 Billion - which was their strongest monthly net buying since Sep '17.

India's GDP grew 7.2% in Q3 (Dec '17) against a revised 6.5% growth in Q2 (Sep '17) on the back of a rebound in industrial activity.

Auto sales showed good growth in Feb '18. 2-wheelers, 3-wheelers and Commercial Vehicles showed double-digit growth. In passenger vehicles, Tata Motors and Maruti showed double-digit growth, but M&M, Ford, Hyundai, Toyota showed mid to low single digit growth.  

BSE Sensex index chart pattern

For the past 4 weeks, the daily bar chart pattern of Sensex has been consolidating sideways below the 132 points downward 'gap' formed on Feb 5. By touching lower tops and higher bottoms during the consolidation, the index is forming a 'symmetrical triangle' pattern. 

Triangles are unreliable but tend to be continuation patterns. Since the 'triangle' has formed after a correction from the Jan 29 top, the likelihood of a downward breakout is higher.

That opens up the possibility of a test of support from the rising 200 day EMA. In case of a less likely upward breakout, the 'gap' is going to provide resistance.

Daily technical indicators are looking bearish. MACD has merged with its falling signal line in bearish zone. ROC and RSI have slipped back into bearish zones. Slow stochastic is in bullish zone, but showing downward momentum.

DII buying has managed to put a temporary floor on the index. However, with a slew of IPOs in the pipeline, liquidity in the secondary market may begin to dry up.

The index is trading above its rising 200 day EMA. The long-term trend remains bullish. In the near-term - at least till Mar 31 '18 - 'sell on rise' may be a more profitable option. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty spent a fourth week below a 33 point downward 'gap' but managed to close above its 20 week and 50 week EMAs in a bull market.

The index appears to be forming a 'symmetrical triangle' pattern from which the likely breakout is downwards. 'Triangle' patterns tend to be unreliable, so it is better to wait for the breakout before taking any buy/sell decision.

In case of an upward breakout, the 'gap' should provide resistance. But an upward breakout seems unlikely - unless FIIs resume buying. Interestingly, they were net buyers on Thu. Mar 1 - ahead of the long weekend. 

Weekly technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. ROC is falling below its 10 week MA and looks ready to enter bearish zone. RSI is seeking support from its 50% level. Slow stochastic is moving sideways below its 50% level.

Nifty's TTM P/E has moved down to 25.59 - but remains well above its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone after falling sharply from its oversold zone. Some more sideways consolidation is possible. 

Bottomline? Sensex and Nifty charts are undergoing bull market corrections after touching lifetime highs 5 weeks ago. The downward 'gaps' formed on Mon. Feb 5 have acted as resistance zones. Both indices have formed 'symmetrical triangle' patterns from which downward breakouts are likely. Use a 'sell on rise' strategy in the near-term.

No comments: