Wednesday, April 18, 2018

Nifty chart: a midweek technical update (Apr 18, 2018)

FIIs were net sellers of equity on all three days of trading this week. Their total net selling was worth Rs 21.7 Billion. DIIs were net buyers of equity on Tue. & Wed. (Apr 17 & 18) but net sellers on Mon. Apr 16. Their total net buying was worth Rs 15.6 Billion, as per provisional figures.

For the 13th trading day in a row, Nifty touched a higher intra-day high (of 10594 today) as it continued its counter-trend rally from its Mar 23 low of 9952, but failed to close above the Fibonacci resistance zone (between 10400 & 10550 - refer last week's post).

The International Monetary Fund (IMF) has projected India's GDP growth rate at 7.4% in FY 18-19 and 7.8% in FY 19-20 against 6.7% in FY 17-18 - making it the world's fastest growing major economy.

After 9 consecutive days of gains, the daily bar chart pattern of Nifty formed a 'reversal day' bar (higher high, lower close) today, and closed lower within the Fibonacci resistance zone. A 'reversal day' bar often forms at an intermediate top.

All three EMAs are rising, and Nifty closed above them in bull territory. However, bulls still have a lot of work left. The 33 points downward 'gap' looming overhead is expected to provide strong resistance - as and when Nifty makes an attempt to fill it.

Daily technical indicators are in bullish zones, but only MACD is showing upward momentum as it rises above its signal line. RSI and Slow stochastic are poised to move down. The index can correct or consolidate within the resistance zone.

The (purple) up trend line from the Mar 23 low is a bit steep, so its downward breach may not be too bearish. But a fall below 10400 will signal the next leg of the down move from Nifty's Jan 29 top. 

Nifty's TTM P/E has moved up to 26.13 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone, and can limit index upside.

Small investors shouldn't get too enamoured by the counter-trend rally. Such rallies are often sharp, but can flatter to deceive. On the macroeconomic front, rising oil prices and a falling Rupee is stirring up a deadly cocktail that can stoke inflation and force RBI to raise interest rates. 

No comments: