Saturday, June 30, 2018

Sensex, Nifty charts (Jun 29, 2018): bears refuse to cede any ground to bulls

For the month of Jun '18, FIIs were net sellers of equity worth Rs 102.50 Billion. DIIs were net buyers of equity worth Rs 141.50 Billion, as per provisional figures.

Sensex gained barely 100 points (0.3%) on a monthly closing basis, while Nifty lost 22 points (0.2%) despite strong buying by DIIs.

At US $529 Billion, India’s foreign currency debt at end-Mar '18 rose 2.4% over its level at end-Mar '17, primarily on account of an increase in commercial borrowings, short-term debt and NRI deposits, according to a release by RBI. 


BSE Sensex index chart pattern


This was the concluding comment in last week's post on the daily bar chart pattern of Sensex: "As long as bears are able to defend the down trend line, the possibility of a fall towards (and even below) the 132 points 'gap' can't be ruled out."

On Mon. Jun 25, the index made an intra-day attempt to breach the down trend line. Bears stood firm, and sent bulls packing to seek support from the 20 day EMA.  On Wed. Jun 27, the index dropped and closed below its 20 day EMA.

On Thu. Jun 28, the expected happened. Sensex not only dropped below its 50 day EMA for the first time in more than a month, but fell inside the 132 points 'gap' before bouncing up to close above it. 

The index closed the week and month above its three EMAs in bull territory on the back of huge buying by DIIs - but lost more than 260 points (0.7%) for the week.

Daily technical indicators are looking neutral to bearish. MACD is below its signal line, and is falling towards its neutral zone. ROC is below its 10 day MA, and rising towards its neutral zone. RSI has moved up to its neutral zone after slipping below it. Slow stochastic has dropped to the edge of its oversold zone.

The rising 200 day EMA shows that the long-term chart structure remains bullish. The down trend line, which has dominated the chart for the past 5 months, shows that bears are not ready to give up their near-term advantage.

Stay cautiously optimistic and be very selective. 2018 is not going to be an easy year to make money in the stock market for investors. 

NSE Nifty index chart pattern


The bearish 'hanging man' candlestick pattern in the previous week's bar chart pattern of Nifty had given advanced warning of a possible corrective move. 

The index faced strong resistance from the down trend line for the third straight week, and corrected below the 33 points 'gap' (formed on Feb 5) and its 20 week EMA before bouncing up to close inside the 'gap'.

Unlike a support or resistance level, which gets weakened with each subsequent test, a trend line gets strengthened by subsequent tests. Bears are using that knowledge to their advantage.

Weekly technical indicators are in bullish zones, but their upward momentum has slowed down. MACD has started to slide down towards its signal line. Slow stochastic has started falling inside its overbought zone. ROC has dropped from its overbought zone and crossed below its rising 10 week MA. Only RSI is showing a bit of upward momentum inside its overbought zone.

For the past 12 weeks, the 20 week EMA has provided down side support to the index. A likely fall below the 20 week EMA can lead to a test of support from the 50 week EMA.

Nifty's TTM P/E has slipped further to 25.9 - which is still well above its long-term average. The breadth indicator NSE TRIN (not shown) is in neutral zone, hinting at some consolidation around current levels.

Bottomline? Bears have dug in their heels and have strongly defended down trend lines on Sensex and Nifty charts. Bulls have failed to budge them so far. Some more consolidation or correction can be expected. Stay on the sidelines till clear trends emerge. Long term trends remain up. 

Friday, June 29, 2018

3 Charts Suggest Emerging Markets Downtrend Just Getting Started

"One of the most common sell signals used by active traders occurs when the 50-day moving average crosses below the 200-day moving average. 

This iconic breakdown is known by many as the death cross and is used to signal the beginning of a long-term downtrend. 

In the paragraphs below, we'll take a look at several charts suggesting that the emerging markets are in the early days of a major downtrend and that lower prices could be a consistent theme over the coming weeks or months."

Read more at:
https://www.investopedia.com/news/3-charts-suggest-emerging-markets-downtrend-just-getting-started/

Wednesday, June 27, 2018

Nifty chart: a midweek technical update (Jun 27, 2018)

FIIs were net sellers of equity on Tue. Jun 26, but net buyers on Mon. & Wed. (Jun 25 & 27). Their total net selling was worth Rs 2.72 Billion. DIIs were net buyers on Tue. & Wed. but net sellers on Mon. Their total net buying was worth Rs 2.36 Billion, as per provisional figures.

The GST investigation wing has detected tax evasion of over Rs 20 Billion in 2 months through raising of fake invoices to claim input tax credit and GST refunds. Of the 11.1 million registered businesses, less than 100,000 are paying 80% of the taxes.

Ahead of next week's first India-US 2+2 dialogue when India's External Affairs Minister and Defence Minister will meet US Secretary of State and Secretary of Defence, President Trump accused India of charging high import duties of 100% on American products. The trade war is well and truly on.



Note the following comments from last week's technical update on the daily bar chart pattern of Nifty: "A convincing move above the down trend line is necessary for bulls to regain control of the chart...A fall below the 50 day EMA can lead to a test of support from the 200 day EMA."

On Jun 13, Nifty had made an intra-day attempt to move above the (purple) down trend line, but failed to close above it. The index had subsequently corrected down, but found support at the 33 points 'gap' (formed on Feb 5).

Nifty made two more attempts in quick succession - on Jun 22 & 25 - but faced strong resistance from the down trend line. The index bounced up on Tue. Jun 26 after finding support from its 20 day EMA and the 'gap'.

Today's sharp correction not only dropped Nifty below the 'gap' but also below the (green) up trend line drawn through the Mar '18 and May '18 lows. Though the index fell below the 50 day EMA intra-day, it managed to close just above it. Technically, the 50 day EMA has not been breached yet.

Daily technical indicators have turned bearish and are showing downward momentum. MACD has crossed below its signal line in bullish zone. RSI has fallen below its 50% level. Slow stochastic formed a 'head and shoulders' reversal pattern and is plummeting towards its oversold zone.

Bears have forced open the door for an index fall below the 50 day EMA, and a test of support from the 200 day EMA. Will Nifty fall that far? May be not right away. Expect support from the zone between 10400 and 10550 (corresponding to the lows made on May 23 and Jun 5).

Nifty's TTM P/E has slipped further to 25.73 - which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone, and hinting at near-term index down side.

Trump has started trade wars with China, EU, Canada, Mexico, and now India. The consequences will not be pleasant for global economic growth. Possibility of a recession can no longer be ruled out. No wonder equity markets worldwide have started to tumble.

The long-term structure of the Nifty chart is bullish, and will remain so as long as the index trades above its rising 200 day EMA. However, the breach of a 3 months long up trend line should be treated with caution by investors. 

Tuesday, June 26, 2018

Gold and Silver charts: bears calling the shots again

Gold chart pattern


Note the following comments from the previous post on the daily bar chart pattern of Gold: "Expect some more sideways consolidation before gold's price can either breakout above 1310 or fall towards 1280. A test of support from 1280 seems the more likely near-term possibility."

On Thu. Jun 14, gold's price made a desperate attempt to cross above 1310. Resistance from the falling 50 day EMA ensured a close inside the 'Support-Resistance zone' between 1300 and 1310.

That was the trigger for bears to attack. On Fri. Jun 15, a sharp correction accompanied by a volume surge dropped gold's price to a close below 1280. A weak effort at a pullback above 1280 was met with more selling by bears.

Daily technical indicators are looking oversold. But don't expect a strong fight back by bulls. Any attempt at a pullback will provide another selling opportunity. The 'death cross' of the 50 day EMA below the 200 day EMA has technically confirmed a return to a bear market.

On longer term weekly chart (not shown), gold’s price closed below its three weekly EMAs in long-term bear territory.  Weekly MACD and RSI are falling in bearish zones. Slow stochastic is falling inside its oversold zone. Some more correction is possible.

Silver chart pattern


For the second time in 2 months, the daily bar chart pattern of Silver surged above 'Resistance Zone 1' (between 16.90 and 17) with strong volume support. For the second time, 'Resistance Zone 2' (between 17.30 and 17.40) proved to be insurmountable.

Bears swung into action immediately. Silver's price plummeted below its three EMAs with a volume surge on Fri. Jun 15, wiping out all gains made in the previous 7 trading sessions.

On Thu. Jun 21, silver's price dropped to seek support from the 'Support zone' (between 16.10 and 16.20), only to bounce up - as it has done several times during the past 5 months. How much longer can the 'Support zone' hold?

Daily technical indicators are in bearish zones, with MACD showing downward momentum. Slow stochastic is trying to recover from its oversold zone. All three EMAs are sliding down, and silver's price is trading below them in a bear market.

On longer term weekly chart (not shown), silver’s price closed below its three sliding weekly EMAs in a long-term bear marketWeekly technical indicators are in bearish zones. Slow stochastic is showing downward momentum. 

Monday, June 25, 2018

S&P 500 and FTSE 100 charts (Jun 22, 2018): bulls forced to retreat

S&P 500 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "In case of further correction, 'GAP 2' should provide strong support." 

The index consolidated sideways within a 32 points range (between 2743 and 2775) and dropped below its 20 day EMA to seek support from 'GAP 2' on Tue. Jun 19 and Thu. Jun 21.

Note that the index formed a small 'rounding top' reversal pattern, which is more clearly visible on MACD and RSI indicators. While MACD has crossed below its signal line in bullish zone, RSI is seeking support from its 50% level.

Slow stochastic has dived below its 50% level, and may be hinting at a further fall in the index towards its 50 day EMA. As long as 2680 is not breached, the past 3 months' bullish pattern of 'higher tops, higher bottoms' will remain intact.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking bullish, but MACD and RSI are not showing upward momentum. Slow stochastic is overbought, and can trigger a correction.

FTSE 100 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "Daily technical indicators are looking bearish and showing downward momentum - hinting at more consolidation/correction." 

The index breached the support level of 7601 thrice during the week. On Tue. Jun 19 and Fri. Jun 22, the breaches were intra-day. On Thu. Jun 21, the index closed below its 20 day and 50 day EMAs at 7556 - its lowest close since May 2.

Though FTSE closed with a 48 points (0.6%) weekly gain on Fri. Jun 22, repeated breaches of a long-term support level is a clear warning that worse may follow. (At the time of writing this post, the index is on the verge of falling below 7601 again.)

Daily technical indicators are in bearish zones. A test of support from the 200 day EMA may be on the cards.

On longer term weekly chart (not shown), the index bounced up after testing support from its 20 week EMA, and closed above its  three weekly EMAs in a long-term bull market. Weekly technical indicators are correcting overbought conditions.

Sunday, June 24, 2018

Sensex, Nifty charts (Jun 22, 2018): bears fight hard to keep bulls at bay

FIIs were net sellers of equity worth Rs 47.4 Billion during the week, though they were net buyers on Thu. Jun 21. DIIs were net buyers of equity worth Rs 47.2 Billion, as per provisional figures. Sensex and Nifty gained marginally on a weekly closing basis.

Out of 21 PSU banks, only 2 - Indian Bank and Vijaya Bank - were able to pay dividends worth Rs 4.44 Billion to the government. This was the worst dividend payout by PSU banks in the past 10 years.

The government is considering a proposal to sell a significant proportion of its stake in IDBI Bank to LIC, and has approached IRDAI for clearance (as LIC already holds more than 10% stake in IDBI and can't hold more than 15% in a single company).

BSE Sensex index chart pattern



The following comments were made in last week's post on the daily bar chart pattern of Sensex: "The 20 day EMA is merging with the lower edge of the 'rising wedge'. That ought to help bulls put up a fight to prevent a likely fall below the 'wedge'."

The index did fall below the 'rising wedge' on Tue. Jun 19 but received support from its 20 day EMA. For the rest of the week, the index continued to receive support from the 20 day EMA but faced resistance from the lower edge of the 'wedge'.

The down trend line is also providing resistance to the index - as it has done for almost 5 months. Sensex closed above its three rising EMAs in bull territory, but needs to move convincingly above the down trend line to attain new highs.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is entangled with its signal line and moving sideways. ROC bounced up from its '0' line but remains below its 10 day MA. RSI and Slow stochastic are rising towards their respective overbought zones.

Despite OPEC's decision to increase output on Fri. Jun 22, oil prices shot up as the announced increase was less than expectations. Progress of the monsoon across India has been slow. These are worrying signs that inflation may continue to rise.

Bull markets are supposed to take all worries in stride. However, caution is advised. As long as bears are able to defend the down trend line, the possibility of a fall towards (and even below) the 132 points 'gap' can't be ruled out. 

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty dropped to seek support from the 33 points downward 'gap', but bounced up to close with a weekly gain for the 5th week in a row.

The down trend line again provided strong resistance. Nifty's weekly bar formed a bearish 'hanging man' candlestick pattern. Volume bars are showing negative divergence by touching lower tops.

Weekly technical indicators are in bullish zones. MACD has started to rise above its signal line. RSI is facing resistance from the edge of its overbought zone. Slow stochastic has entered its overbought zone. 

However, ROC is about to cross below its rising 10 week MA, and has slipped down from its overbought zone. Some correction or consolidation is likely.

Nifty's TTM P/E has slipped down to 26.63 - still well above its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some consolidation around current levels.

Bottomline? Bears strongly defended down trend lines on Sensex and Nifty charts. Bulls are pushing them to the limit of their resistance. Some more consolidation or correction can be expected in F&O expiry week. Stay on the sidelines till clear trends emerge. Long term trends remain up. 

Friday, June 22, 2018

Understanding the Cash Conversion Cycle

"The cash conversion cycle (CCC) is one of several measures of management effectiveness. It measures how fast a company can convert cash on hand into even more cash on hand. 

The CCC does this by following the cash as it is first converted into inventory and accounts payable (AP), through sales and accounts receivable (AR), and then back into cash. Generally, the lower this number is, the better for the company. 

Although it should be combined with other metrics (such as return on equity and return on assets), the cash conversion cycle can be especially useful for comparing close competitors because the company with the lowest CCC is often the one with better management."

Read more at:
https://www.investopedia.com/articles/06/cashconversioncycle.asp

Wednesday, June 20, 2018

Nifty chart: a midweek technical update (Jun 20, 2018)

FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth a huge Rs 45.2 Billion. DIIs were net buyers on all three trading days. Their total net buying was worth Rs 29.5 Billion, as per provisional figures.

Domestic air passenger traffic grew 16.53% to 11.86 million in May '18 as compared to 10.17 million in May '17according to data released by DGCA.

Overseas funds are pulling out of six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 — withdrawing US $19 Billion from India, Indonesia, Philippines, South Korea, Taiwan and Thailand so far this year, according to Bloomberg.


The daily bar chart pattern of Nifty shows that bears are putting up strong resistance by defending the down trend line. Following last Wednesday's intra-day breach, the index dropped to seek support from the 'gap' formed on Feb 5.

The index bounced up today and closed above its three EMAs in bull territory. A convincing move above the down trend line is necessary for bulls to regain control of the chart.

Daily technical indicators are in bullish zones, but not showing any upward momentum. A fall below the 50 day EMA can lead to a test of support from the 200 day EMA.

Nifty's TTM P/E has slipped a bit to 26.52 - which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is showing downward momentum in neutral zone, and can trigger some near-term index up side.

FIIs continue to sell heavily. The Rupee is weakening against the US Dollar. The OPEC meeting on Jun 22 will decide the near-term trend in oil's price. Trump's trade war with China can upset global economic growth trajectory.

All of the above may increase volatility in the stock market. So, remain cautious. The rising 200 day EMA is an indication of a bull market. No need for any panic selling or impulsive buying.

Tuesday, June 19, 2018

WTI and Brent Crude Oil charts: bears trying to gain control

WTI Crude Oil chart


The following remarks were made in the previous post on the daily bar chart pattern of WTI Crude Oil: "Slow stochastic is well inside its oversold zone. A likely pullback towards the 'Support/Resistance zone' will provide bears another selling opportunity."

The expected pullback almost turned into a rally, but formed a bearish 'rising wedge' pattern. Note the sliding volumes during the formation of the 'wedge' pattern, which gave a warning that the rally would not last.

On Thu. Jun 14, oil's price rose above the 'support/resistance zone' intra-day, but faced strong resistances from the upper edge of the 'wedge' and the merged 20 day and 50 day EMAs.

A sharp breakout below the 'rising wedge' on Fri. Jun 15 was followed by a pullback towards the 'wedge' and the 'support/resistance zone' on Mon. Jun 18. Bears may use the pullback to sell.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. Oil's price is trading above its rising 200 day EMA in bull territory. However, bears are gaining ground.

On longer term weekly chart (not shown), oil's price is struggling to stay above its 20 week EMA but closed above its 50 week and 200 week EMAs. Weekly MACD is falling in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has dropped below its 50% level. Some more correction or consolidation is likely.

Brent Crude Oil chart


The following remarks were made in the previous post on the daily bar chart pattern of Brent Crude Oil: "Oil's price is trading above its 50 day and 200 day EMAs in bull territory, but the corrective move may continue a while longer."

For more than 3 weeks, oil's price has been correcting within a downward-sloping channel. On Fri. Jun 15, oil's price closed at the lower edge of 'support/resistance zone 2'.

On Mon. Jun 18, oil's price formed a large 'reversal day' bar by falling lower to the edge of the channel, only to bounce up and close above its 50 day EMA. Another attempt may be made by bulls to breach the upper edge of the channel.

Daily technical indicators are looking bearish to neutral. MACD is below its falling signal line and has entered bearish zone. RSI is in neutral zone, and showing some upward momentum. Slow stochastic is in bearish zone, and moving down. 

On longer term weekly chart (not shown), oil's price received support from its 20 week EMA, and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators have corrected overbought conditions. Some more correction or consolidation is likely.

Monday, June 18, 2018

S&P 500 and FTSE 100 charts (Jun 15, 2018): bears stall bull rallies

S&P 500 index chart pattern


The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "Note that Friday's higher close was on weaker volumes. Bears may use the opportunity to force bulls to retreat. Any further rally is likely to face resistance from the 2810 level."

The index faced resistance at 2790, and pulled back to the top of the 'Flag' pattern on Wed. Jun 13. Instead of bouncing up, the index dropped inside the 'Flag' intra-day on Fri. Jun 15 but managed to close just above the 'Flag'.

Friday's trading formed a 'hammer' candlestick pattern that has bullish implications. The significant volume spike is probably a sign of 'selling climax'. 

Daily technical indicators are in bullish zones. MACD and RSI are moving sideways. Slow stochastic is sliding down inside its overbought zone. The index is trading above its three rising EMAs in a bull market. 

A possible move above 2810 can lead to a test of resistance from 'GAP 1'. Bears can be expected to give ground grudgingly. In case of further correction, 'GAP 2' should provide strong support. 

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market, but formed a 'doji' candlestick that can lead to some correction or consolidation. Weekly technical indicators are looking bullish.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 spent another week consolidating sideways in a range between 7601 and 7793. 

On Thu. Jun 14, the index tested resistance from its Jan '18 top of 7793 but dropped to close below its 20 day EMA on Fri. Jun 15 - with a weekly loss of 0.6%.

The 50 day and 200 day EMAs are rising, and FTSE is trading above them in a bull market. Daily technical indicators are looking bearish and showing downward momentum - hinting at more consolidation/correction. 

On longer term weekly chart (not shown), the index closed well above its  three weekly EMAs in a long-term bull market. Weekly MACD is moving sideways inside its overbought zone. RSI is rising above its 50% levelSlow stochastic has fallen from its overbought zone.

Sunday, June 17, 2018

Sensex, Nifty charts (Jun 15, 2018): bulls fail to overcome resistance from bears

FIIs stepped up their selling. They were net sellers of equity worth a huge Rs 52.9 Billion during the week. DIIs were net buyers of equity worth Rs 40.1 Billion, as per provisional figures. Sensex and Nifty gained about 0.5% each on a weekly closing basis.

India's Current Account Deficit (CAD) widened to US $13 Billion (1.9% of GDP) in Q4 (Mar '18), up from US $2.6 Billion (0.4% of GDP) in Q4 (Mar '17), but slightly lower than $13.7 Billion (2.1% of GDP) in Q3 (Dec '17). Higher software exports and remittances were not enough to cover higher crude oil and commodity prices.

WPI inflation jumped to 4.43% in May '18 - a 14 months high - against 2.26% in May '17 and 3.6% in Apr '18 - largely on account of higher fuel, fruit and vegetable prices.

BSE Sensex index chart pattern



The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "Bears are not giving up just yet. A fall below the 'rising wedge' may lead to a test of support from the 'Support/Resistance zone'. The balance can swing toward bulls if the index moves above the down trend line."

On Wed. Jun 13, the index crossed above the down trend line intra-day but faced resistance from the upper edge of the 'rising wedge' pattern (within which it has been trading for the past 4 weeks).

Profit booking ensued. The index dropped towards the lower edge of the 'wedge', and touched an intra-day low of 35420 on Fri. Jun 15. Bears bought the dip and prevented a fall below the 'wedge'. Sensex closed for the week above its three daily EMAs in bull territory. 

Daily technical indicators are in bullish zones, but turning bearish. MACD is moving sideways above its rising signal line in bullish zone. ROC formed a 'double top' reversal pattern and fell below its 10 day MA. RSI has dropped from its overbought zone. Slow stochastic is about to fall from its overbought zone.

There are strong supports for the index on the downside. The 20 day EMA is merging with the lower edge of the 'rising wedge'. That ought to help bulls put up a fight to prevent a likely fall below the 'wedge'.

The 50 day EMA has just entered the 132 points 'gap' (formed on Feb 5), and should provide stronger support to the index in case of a fall below the 'wedge'.

Can the index fall below the 'gap'? Anecdotal evidence suggests the possibility. Rising interest rate and a falling Rupee has sent even long-only funds scurrying towards the 'exit' door. In which case, Sensex can fall towards the 'Support/Resistance zone' and test support from the rising 200 day EMA.

An index move above the down trend line and the May '18 top of 35994 will lead to new lifetime highs. But that may happen after some more correction and consolidation.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty closed higher for the 4th week in a row, and managed to breach the down trend line intra-week. The 20 week and 50 week EMAs are rising, and the index closed above them for the 10th straight week.

In other words, the bull market is very much alive - even though the index has closed below the down trend line for 20 weeks in a row. Note that the volume bars are showing negative divergence by falling while the index has been rising higher for the past two weeks.

Weekly technical indicators are in bullish zones. MACD has started to rise above its signal line. RSI has climbed up to the edge of its overbought zone. Slow stochastic has entered its overbought zone. ROC is above its rising 10 week MA, but is poised to fall from its overbought zone. Some correction or consolidation may follow.

Nifty's TTM P/E has moved up to 27.44 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone, and can limit near-term index upside.

Bottomline? Another attempt by bulls to regain control of Sensex and Nifty charts was thwarted by bears, who defended the down trend lines well. Some more consolidation or correction appears likely. Small investors should continue their SIPs but stay away from any impulsive buying/selling till a clear trend emerges. Long term chart structures remain bullish. 

Friday, June 15, 2018

Candlesticks and Oscillators for Successful Swing Trades

"Swing traders specialize in using technical analysis to take advantage of short-term price moves. Successfully trading these swings requires the ability to accurately determine both trend direction and trend strength. 

This can be done through the use of chart patterns, oscillators, fractals, volume analysis and a variety of other methods. This article will focus on using oscillators and candlestick patterns as a quick and easy way to characterize a trend and successfully identify swing trades."

Read more at:

https://www.investopedia.com/articles/trading/06/swingtrades.asp

Wednesday, June 13, 2018

Nifty chart: a midweek technical update (Jun 13, 2018)

FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 24 Billion. DIIs were net buyers on all three trading days. Their total net buying was worth Rs 28.8 Billion, as per provisional figures.

CPI inflation rose to a 4 months high of 4.87% in May '18 as compared to 4.58% in Apr '18 and 2.18% in May '17. Higher food and fuel prices were the components stoking inflation.

The IIP number increased a little to 4.9% in Apr '18 against a 5 months low of 4.4% in Mar '18. Mining and scientific instruments were positive contributors, while gold jewellery was a negative contributor.


The daily bar chart pattern of Nifty shows that bulls are gradually overcoming all the challenges thrown at them by bears - by moving above the downward 'gap' of Feb 5 and testing resistance from the (purple) down trend line.

The trigger may have been provided by last Friday's (Jun 8) trading, when the index dropped inside the 'gap' intra-day, but bounced up to close above it.

Nifty breached the down trend line during intra-day trading today, but pulled back below the trend line on profit booking before closing exactly on it. Bulls will regain control of the chart once the index crosses above its previous (May 15) top of 10929.

Daily technical indicators are in bullish zones but looking overbought. MACD is rising above its signal line, and has entered its overbought zone. RSI is slowly moving up towards its overbought zone. Slow stochastic is well inside its overbought zone.

Nifty's TTM P/E has risen to 27.54 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone, and can limit further index up side.

Rising inflation without much growth in industrial production is a worrying sign. So is the weak Rupee. The index is where it was in end Feb '18 in US Dollar terms. That is one of the reasons why FIIs are not buying. Oil's price has moderated a bit, but can go up again after OPEC's meeting on Jun 22.

Q4 (Mar '18) corporate results have shown revenue growth but margin pressure. Nifty's TTM P/E is looking unsustainable with no earnings improvement in sight. Remember that you make money in the stock market by being fearful when others are greedy - and vice versa.

Nifty is trading above its three rising EMAs in a bull market. The long-term structure of the chart remains bullish. Small investors should be cautiously optimistic. 

Tuesday, June 12, 2018

Gold and Silver charts: facing resistance on every rally

Gold chart pattern


The following comment was made in the previous post on the daily bar chart pattern of Gold: "The breakout below the 'support zone' is a clear hint from bears that they will continue to 'sell on every rise' to retain their advantage."

A support zone - once breached - often turns into a resistance zone. That is precisely what the zone between 1300 and 1310 has become. Bears have sold on every rise to prevent gold's price from crossing above 1310.

The 20 day EMA has crossed below the 200 day EMA. The 50 day EMA is falling towards the 200 day EMA. A '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 conveying mixed signals. MACD is above its rising signal line in bearish zone. RSI is moving sideways just below its 50% level in neutral zone. Slow stochastic is in bullish zone, but its upward momentum has stalled.

Expect some more sideways consolidation before gold's price can either breakout above 1310 or fall towards 1280. A test of support from 1280 seems the more likely near-term possibility.

On longer term weekly chart (not shown), gold’s price closed below its 20 week EMA but just above its 50 week EMA and well above its 200 week EMA in long-term bull territory.  Weekly technical indicators are looking neutral to bearish. MACD and RSI are in neutral zones. Slow stochastic is near the edge of its oversold zone.

Silver chart pattern


The sideways price consolidation on daily bar chart pattern of Silver has entered its 5th month. After facing resistance from its sliding 200 day EMA during May '18, silver's price moved up with strong volume support above its 200 day EMA on Thu. Jun 7.

The resistance zone between 16.90 and 17 proved to be a tough hurdle for bulls. Note that volumes were lower during yesterday's surge towards the top of the resistance zone.

Daily technical indicators are looking bullish, and showing some upward momentum. Slow stochastic has entered its overbought zone. Bears may get encouraged to 'sell on rise' again. 

On longer term weekly chart (not shown), silver’s price closed above its 20 week and 50 week EMAs, but well below its sliding 200 week EMA in a long-term bear marketWeekly technical indicators are in neutral zones and showing some upward momentum. 

Monday, June 11, 2018

S&P 500 and FTSE 100 charts (Jun 08, 2018): bulls gaining ground

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: "Bulls may make another attempt to fill 'GAP 2' - either partly or completely. Their previous two attempts had failed. May be it will be 'third time lucky'? Even if it is, the upper edge of 'GAP 2' can provide tougher resistance."

Bulls did make another attempt to fill 'GAP 2' and were 'third time lucky' by completely filling it. On Wed. Jun 6, the index overcame resistance from the upper edge of 'GAP 2' and closed above the 'Flag' pattern.

Next day, the index pulled back to the top of the 'Flag' after facing resistance from the 2780 level - giving bulls a chance to 'buy the dip'. On Fri. Jun 8, the index bounced up to close just below 2780 with a 1.6% weekly gain.

Daily technical indicators are looking bullish and a bit overbought. MACD has entered its overbought zone. RSI is trying to rise towards its overbought zone. Slow stochastic is inside its overbought zone, and showing negative divergence by failing to rise higher with the index.

Note that Friday's higher close was on weaker volumes. Bears may use the opportunity to force bulls to retreat. Any further rally is likely to face resistance from the 2810 level. 'GAP 1' - which has remained unfilled for more than 4 months - is going to provide stronger resistance.

The index is trading above its three rising EMAs. The long-term structure of the chart remains bullish.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are showing upward momentum in bullish zones.

FTSE 100 index chart pattern


The following remark appeared in last week's post on the daily bar chart pattern of FTSE 100: "The index may attempt to cross above its Jan '18 top of 7793 after some more consolidation in the zone between 7610 and 7793." 

As expected, the index consolidated in the zone between 7610 and 7793 during the week. On Fri. Jun 8, the index dropped sharply below its 20 day EMA to an intra-day low of 7638, but closed above it - forming a 'hammer' candlestick that has bullish implications. (At the time of writing this post, FTSE is trading 38 points higher.)

Daily technical indicators are looking bearish. MACD and RSI are falling in bullish zones. Slow stochastic is trying to recover after falling into bearish zone. Some more consolidation is likely. 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 weekly EMAs in a long-term bull market, but formed a 'doji' candlestick that shows indecision among bulls and bears. Weekly MACD is rising inside its overbought zone. RSI is rising above its 50% levelSlow stochastic is about to fall from its overbought zone.