Friday, August 31, 2018

Market Timing Tips Every Investor Should Know

It's a long-held belief that market timing and investing are mutually exclusive, but the two strategies work well together in producing solid returns over a number of years. 

The effort requires a step back from the buy-and-hold mindset that characterizes modern investing and adding technical principles that assist entry timing, position management and, if needed, early profit taking.

This set of technical tips can guide your investments through a gauntlet of modern market dangers:

https://www.investopedia.com/articles/active-trading/043015/market-timing-tips-rules-every-investor-should-know.asp

Wednesday, August 29, 2018

Nifty chart: a midweek technical update (Aug 29, 2018)

FIIs were net buyers of equity on Mon. Aug 27 but net sellers on Tue. & Wed. (Aug 28 & 29). Their total net selling was worth Rs 13.2 Billion. DIIs were net buyers of equity on Mon. & Wed. but net sellers on Tue. Their total net buying was worth Rs 20.3 Billion, as per provisional figures.

As per RBI, Rs 15.31 Trillion of high-value notes (~99.4%) out of Rs 15.41 Trillion in circulation on Nov 8 '16 (the day Modi announced demonetisation) has been returned to the system. Demonetisation was a spectacular flop that hurt the rural economy the most.

A Moody's report has highlighted risks of India breaching the 3.3% fiscal deficit target for FY 2018-19 as higher oil prices will add to short-term fiscal pressures.


The daily bar chart pattern of Nifty touched a new high of 11760 on Tue. Aug 28, but lost more than 80 points today as the market appeared to be spooked by the Rupee falling to a record low of 70.51 to the US Dollar.

Technical headwinds may have also contributed to today's fall. The index is trading well above its three EMAs in a bull market, but the widening gap between the 20 day and 200 day EMAs is a sign of overbought conditions that often trigger a correction.

For the past two months, the index has been trading within a steep upward-sloping channel. Such a steep rise - mainly led by a few large-cap stocks - is unsustainable for long. Enjoy the rally while it lasts, but maintain a trailing stop-loss.

Daily technical indicators are looking overbought. MACD has crossed above its signal line in overbought zone. RSI and Slow stochastic are inside their respective overbought zones. All three are showing negative divergences by failing to rise higher with the index.

Nifty's TTM P/E has moved up to 28.55 - which is much higher than its long-term average and in overbought territory. The breadth indicator NSE TRIN (not shown) dropped like a brick inside its overbought zone, and may be signalling a correction.

Corrections don't happen when everyone expects them. They occur when least expected, and can be severe after such a sharp rally. So, stay invested but remain cautious. 

Tuesday, August 28, 2018

WTI and Brent Crude Oil charts: bulls reverse two months long down trends

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil dropped below the 65 level and stopped just short of testing support from its rising 200 day EMA, before bouncing up and breaking out of a two months long down trend.

Oil's price is trading above its three EMAs in a bull market. However, volume support during last week's rally wasn't very strong. For the rally to sustain, oil's price needs to move convincingly above 70.

Daily technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI has climbed above its 50% level. Slow stochastic is poised to enter its overbought zone. Some more upside is possible, but beware of lurking bears. 

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are not showing any upward momentum. MACD is falling below its signal line in bullish zone. RSI has moved above its 50% level after slipping below it. Slow stochastic is in bearish zone, but has stopped falling.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil received good support from the 'Support/Resistance zone' (between 70 and 71.30) and bounced up sharply to close above its three EMAs in bull territory.

The near-term down trend from the Jul '18 'double top' pattern has been reversed. However, the slightly longer term down trend from the May '18 'double top' remains in force.

Daily technical indicators are looking bullish. MACD is rising above its signal line and has entered bullish zone. RSI is moving moving above its 50% level. Slow stochastic has entered its overbought zone, and can trigger a pullback towards the 20 day EMA.

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are looking bullish. MACD is moving sideways below its signal line in bullish zone. RSI is rising above its 50% level. Slow stochastic has bounced up from the edge of its oversold zone, and is hinting at more upside.

Monday, August 27, 2018

S&P 500 and FTSE 100 charts (Aug 24, 2018): bulls remain on top but bears refusing to give up

S&P 500 index chart pattern


Note the following comment from last week's post on the daily bar chart pattern of S&P 500: "A convincing move above the Aug 7 top of 2863 should take the index to a new lifetime high after almost 7 months."

On Tue. Aug 21, the index tested its Jan 26 top of 2873, but slipped down to close exactly at its Aug 7 top of 2863. Two days of sideways consolidation followed, with the index dropping below 2860.

On Fri. Aug 24, the index touched a new lifetime high of 2876 after almost 7 months before closing just below 2875. Time for bulls to celebrate?

Not yet. While the index was touching new highs during the past month, volumes have been sliding down. Also, all three technical indicators have been showing negative divergences by touching lower tops.

All three EMAs are rising, and the index is trading above them in a bull market. However, technical headwinds may trigger some consolidation or correction. It is better to err on the side of caution when the index is at a new high.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD and RSI are showing upward momentum. Slow stochastic is showing negative divergence by moving sideways inside its overbought zone. 

FTSE 100 index chart pattern

The following comment was made in last week's post on the daily bar chart pattern of FTSE 100: "Some more correction/consolidation within the downward-sloping channel is likely."

As expected, the index consolidated sideways below its 20 day and 50 day EMAs but above its 200 day EMA inside the downward-sloping channel. Some more consolidation seems likely.

Daily technical indicators are in bearish zones. MACD is sliding down below its signal line. RSI is gradually falling below its 50% level. Stochastic is about to resume its downward move towards its oversold zone.

On longer term weekly chart (not shown), the index closed at its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is sliding down below its signal line in bullish zone. RSI is falling in bullish zone. Slow stochastic is falling towards its oversold zone.

Sunday, August 26, 2018

Sensex, Nifty charts (Aug 24, 2018): bull rallies losing steam?

In another holiday-shortened trading week, FIIs were net buyers of equity on Tue. & Thu. (Aug 21 & 23), but net sellers on Mon. & Fri. (Aug 20 & 24). Their total net buying was worth Rs 1.3 Billion. DIIs were net buyers of equity on all four trading days. Their total net buying was worth Rs 18.4 Billion, as per provisional figures.

According to Moody's, India's current account deficit (CAD) will widen to 2.5% of GDP in FY 2018-19 due to higher oil prices and Rupee depreciation. Nomura expects India's CAD to widen to 2.8% of GDP due to rising oil prices, a depreciating Rupee and outflow of foreign portfolio investments.

A Dun & Bradstreet report expects the rise of bank lending rates in general and borrowing cost in specific can dampen India's industrial production and revival in domestic demand.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex touched a new high of 38488 on Thu. Aug 23, but slipped a bit by the end of the week. The index gained 300 points (0.8%) on a weekly closing basis.

Sensex appears to be trading within an upward-sloping channel for the past two months, and is above its three rising EMAs in a bull market. Despite touching a new high, the index failed to move up towards the upper edge of the trading channel.

Daily technical indicators are giving mixed signals. MACD has merged with its signal line and moving sideways near the edge of its overbought zone. RSI has re-entered its overbought zone. ROC has crossed below its falling 10 day MA in bullish zone. Slow stochastic has started to correct after making multiple tops inside its overbought zone.

All four indicators are showing negative divergences by failing to touch new highs with the index. Some correction or consolidation seems likely.

Go through the annual reports of companies that have declared good Q1 (Jun '18) results on YoY and QoQ basis, and make a short-list of the best performers regardless of market-cap. Use the next dip to start adding a few short-listed stocks to your portfolio for the long-term.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty touched a new high of 11621 and gained 86 points (0.75%) on a weekly closing basis. The index is trading well above its two weekly EMAs in a bull market.

Nifty has been trading within an upward-sloping channel for the past two months, and closed higher for the fifth straight week. On the previous such occurrence during Mar-Apr '18, a period of sideways consolidation had followed.

Weekly technical indicators are looking overbought. MACD and RSI rose higher with the index. ROC and Slow stochastic showed negative divergences by moving sideways.

A likely correction or consolidation will improve the technical 'health' of the chart - enabling the index to rise higher.

Nifty's TTM P/E has corrected a bit to 28.06, but remained well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is oscillating above its overbought zone, and can limit index upside.

Bottomline? Bulls are maintaining control of Sensex and Nifty charts. Overbought conditions and divergences on technical indicators can trigger some correction or consolidation. Macro headwinds like high oil prices, a depreciating Rupee, a widening trade deficit, US-China tariff war may keep bullish sentiments subdued. Stay invested but avoid new stock ideas near a market top.

Friday, August 24, 2018

How to Trade Stocks That Hit All-Time Highs

Each phase of an uptrend has unique factors that need strategic shifts in risk management and profit objectives. This is especially true when a security rallies to a new high that hasn't been traded in its long-term history. This scenario can build wealth quickly but requires special technical rules to capitalize on the mechanics in play.

Momentum dynamics shift when a security reaches uncharted territory. The new high print signals very favorable conditions in which there's no oversupply in the form of shareholders who need to sell at a loss or to get even. This lopsided equation can translate into rapid gains that often exceed logical price targets but can also generate unexpected behavior that encourages emotional decision-making. 

Resistance disappears when a security hits an all-time high but hidden obstacles remain, ready to surprise unwary longs with reversals and shakeouts.

Read more at:
https://www.investopedia.com/articles/active-trading/051315/how-trade-stocks-hit-alltime-highs.asp

Wednesday, August 22, 2018

Nifty chart: a midweek technical update (Aug 22, 2018)

FIIs were net sellers of equity on Mon. Aug 20 but net buyers on Tue. Their total net selling was worth Rs 2.3 Billion. DIIs were net buyers of equity on Mon. and Tue. Their total net buying was worth Rs 7.9 Billion, as per provisional figures.

The US government has announced a preliminary 50% anti-dumping duty on large diameter welded metal pipes imported from India. Last year's imports totalled US $295 Million. A higher duty of 133% has been imposed on China.

In a stern warning, the Finance Ministry has asked CEOs of PSU banks to check all non-performing accounts exceeding Rs 500 Million for fraud, or they could face criminal conspiracy charges.


In a holiday-shortened trading week, the daily bar chart pattern of Nifty rose to touch a new lifetime high on Tue. Aug 21, but formed a small 'hanging man' candlestick pattern that has bearish implications.

The index is trading well above its three rising EMAs in a bull market. However, the widening distance between the 20 day and 200 day EMAs is a sign of overbought conditions that can trigger a correction or consolidation at any time.

Daily technical indicators are looking overbought. MACD has crossed above its signal line in bullish zone. RSI and Slow stochastic have re-entered their respective overbought zones. All three are showing negative divergences by failing to rise higher with the index.

Nifty's TTM P/E has moved up to 28.29 - at its highest level this month and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is trying to move up in neutral zone, and can limit index upside.

Bullish sentiments have received a boost after better corporate Q1 (Jun '18) results. The market has already started discounting better Q2 (Sep '18) results - but whether the actual results will be better or not remains to be seen, as a higher base-effect will kick in.

Mid-cap stocks have started participating in the bull rally, which is a bullish sign. Macro headwinds - viz. high oil price, depreciated Rupee, widening trade deficit, rising interest rates - should induce caution rather than euphoria among small investors.

Tuesday, August 21, 2018

Gold and Silver charts: strong US Dollar index wreaks havoc on precious metal bulls

Gold chart pattern


After consolidating sideways for more than two weeks between 'Support/Resistance zone 2 (1237-1248)' and 'Support/Resistance zone 3 (1200-1210)', the daily bar chart pattern of Gold dropped to close below 1200 on Mon. Aug 13.

A brief pullback above 1200 the next day faced more selling pressure from bears. On Thu. Aug 16, gold's price dropped below 1170 - thanks to a rising US Dollar index - losing more than 200 points from its Apr '18 top of 1370. 

A dip in the US Dollar index triggered a pullback towards 1200. Gold's price is trading well below its three daily EMAs in a bear market. Expect the falling 20 day EMA to provide resistance to gold's price - as it has done for more than 4 months.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. MACD has received support from the edge of its oversold zone. RSI and Slow stochastic have emerged from their respective oversold zones.

On longer term weekly chart (not shown), gold’s price closed well below its three weekly EMAs in long-term bear territoryThe 20 week EMA is falling below the 200 week EMA. The 50 week EMA has formed a bearish 'rounding top' pattern and is about to cross below the 200 week EMA. Weekly technical indicators are looking bearish and oversold. 

Silver chart pattern


For more than two weeks, the daily bar chart pattern of Silver consolidated sideways - facing twin resistances from the falling 20 day EMA and the 'Support/Resistance zone (15.60-15.80)' but getting support from the 'Support/Resistance zone (15.00-15.20)'.

On Mon. Aug 13, silver's price dropped sharply and closed below 15. A brief pullback above 15 the next day met with more selling by bears. Silver's price dropped below 14.40 - testing its Jul '17 low - before recovering on short covering to 14.80.

Daily technical indicators remain in bearish zones after correcting oversold conditions. Silver's price is trading well below its three falling EMAs in a bear market. Expect bears to sell on every rise to maintain their domination.

On longer term weekly chart (not shown), silver’s price closed well below its three falling weekly EMAs in a long-term bear marketWeekly technical indicators are looking oversold, and can trigger a pullback towards 15.00-15.20.

Monday, August 20, 2018

S&P 500 and FTSE 100 charts (Aug 17, 2018): bulls on top but bears continue to fight

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: "Some more correction or consolidation is likely. Expect the support/resistance zone between 2780 and 2800 to provide good support on the downside."

On Wed. Aug 15, the index dropped sharply below its 20 day EMA but bounced up after receiving good support from the 'support/resistance zone' between 2780 and 2800. The index closed below its 20 day EMA at its lowest level in 2 weeks.

The index rallied during the next two days and managed to briefly move above the downward 'gap' formed back in Jan 30 before closing at the upper edge of the 'gap'.

All three EMAs are rising, and the index is trading above them in a bull market. A convincing move above the Aug 7 top of 2863 should take the index to a new lifetime high after almost 7 months.

Daily technical indicators are in bullish zones and showing some upward momentum. MACD has stopped falling below its signal line. RSI has bounced up after receiving support from its 50% level. Slow stochastic has moved above its 50% level after briefly falling below it. 

Falling volumes on Thu. and Fri. (Aug 16 and 17) are a sign of tiring bulls. Bears may try to put up a last-ditch fight to prevent the index from rising to a new high. But their cause seems lost.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD and Slow stochastic are inside their respective overbought zones. RSI is rising towards its overbought zone. 

FTSE 100 index chart pattern

After touching a lifetime high of 7903.50 on May 22 '18, the daily bar chart pattern of FTSE 100 has been consolidating sideways within a downward-sloping channel. 

On Wed. Aug 15, the index dropped below its 200 day EMA but bounced up to close above 7550 on Fri. Aug 17 - losing 1.4% on a weekly closing basis. 

Daily technical indicators are in bearish zones. MACD is falling below its signal line. RSI has slipped below its 50% level and showing downward momentum. Stochastic has bounced up from the edge of its oversold zone.

Some more correction/consolidation within the downward-sloping channel is likely.

On longer term weekly chart (not shown), the index closed below its 20 week EMA but above its 50 week and 200 week EMAs in a long-term bull market. Weekly MACD is sliding down below its signal line in bullish zone. RSI is falling in bullish zone. Slow stochastic has fallen below its 50% level.

Sunday, August 19, 2018

Sensex, Nifty charts (Aug 17, 2018): bull markets climb wall of worries

In a holiday-shortened trading week, FIIs were net buyers of equity on Fri. Aug 17, but net sellers on Mon., Tue. and Thu. (Aug 13, 14, 16). Their total net selling was worth Rs 20.3 Billion. DIIs were net buyers of equity on all four trading days. Their total net buying was worth Rs 8.9 Billion, as per provisional figures.

Income tax collection in India during FY 2017-18 was at a record Rs 10 Trillion. A record number of 69.2 million tax returns were filed, which was 13.1 million more than those filed in FY 2016-17.

There has been a steep decline in India's household savings rate - from 23.6% to 16.3% during fiscals 2012 to 2017, as per a report by India Ratings. The decline was primarily due to shocks from high-value note ban and GST implementation. 

BSE Sensex index chart pattern


On Mon. Aug 13, the daily bar chart pattern of Sensex breached the up trend line (marked '2') drawn from the Jun 28 low. For the rest of the holiday-shortened week, the index made gradual upward progress - gaining 0.2% on a weekly closing basis - but remained below up trend line '2'.

The index is trading above its three rising EMAs in a bull market. Breach of a steep up trend line ('2') by a sideways movement may be a warning of an impending correction, but is not necessarily bearish. 

As long as the index remains above the slightly longer-term up trend line ('1') drawn from the Mar 23 low, bulls need not worry. Incidentally, the current level of up trend line '1' is almost the same as the Jan 29 top of 36444. So, it should provide strong support in case Sensex does correct.

Daily technical indicators have corrected overbought conditions but remain in bullish zones. MACD has crossed below its signal line. ROC has crossed above its falling 10 day MA. RSI is sliding down. Slow stochastic is moving up. All four are showing negative divergences by falling below their Aug 2 lows - hinting at some correction or consolidation.

This is not a good time to look for new stock ideas. If you have spareable surplus that you are ready to invest, slowly add to your existing portfolio. Alternatively, wait for dips to add.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty breached the up trend line drawn from the Jun 29 low intra-week, but managed to close above it at a new high of 11471, with a weekly gain of 0.4%.

The breach was not a convincing one as the index did not close below the up trend line. But it may be a warning of an impending correction. The index is trading well above its two rising weekly EMAs in a bull market.

Weekly technical indicators are inside their overbought zones. MACD is rising above its signal line. ROC and RSI are moving sideways with slight downward biases. Slow stochastic is also moving sideways. 

An index can remain overbought for long periods. However, some correction or consolidation will improve the technical 'health' of the chart and enable the index to climb higher.

Nifty's TTM P/E has moved up to 28.11, which is in overbought territory and well above its long-term average. The breadth indicator NSE TRIN (not shown) is moving down towards its overbought zone, and can limit index upside.

Bottomline? Bulls remain in complete control of Sensex and Nifty charts. Overbought conditions and divergences on technical indicators can trigger some correction or consolidation. High oil prices, a falling Rupee, a worsening trade deficit, economic turmoil in Turkey comprise a wall of worries which both indices are trying to climb. Stay cautiously optimistic.

Friday, August 17, 2018

Q1 (June 2018) Earnings Review of Nifty Stocks

If not for a loss by India’s largest lender State Bank of India, Nifty 50 companies would have met the average estimate in the quarter ended June.
The combined earnings per share of the benchmark index constituents missed the consensus by 7 percent, according to BloombergQuint’s calculations. That’s when three-fourths of the 50 companies either surpassed or met forecasts—the highest in at least three quarters.
Read more at:

Wednesday, August 15, 2018

Nifty chart: a midweek technical update (Aug 15, 2018)

FIIs were net sellers of equity on the first two trading days this week. Their total net selling was worth Rs 13.5 Billion. DIIs were net buyers of equity on Mon. and Tue. Their total net buying was worth Rs 6.1 Billion, as per provisional figures.

India's CPI inflation slowed to 4.17% in Jul '18 compared to 4.9% in Jun '18. WPI inflation also slowed to 5.09% in Jul '18 against 5.77% in Jun '18. Cheaper fruit and vegetable prices helped to slow down inflation.

India's trade deficit worsened to US $18 Billion in Jul '18. While exports rose 14.3% to US $25.8 Billion, imports rose 28.8% to US $43.8 Billion. For the Apr-Jul '18 period, trade deficit touched US $63 Billion.


After touching a new high of 11495 on Aug 9. the daily bar chart pattern of Nifty had a brief correction that received good support from the (purple) up trend line drawn from the Jun 28 low.

All three EMAs are rising, and the index is trading above them in a bull market. However, the rally of more than 900 points from the Jun 28 low has been a little too steep. Some more correction or consolidation will improve the technical 'health' of the chart.

Daily technical indicators are in bullish zones after correcting overbought conditions. MACD has slipped below its signal line. RSI and Slow stochastic have fallen from their respective overbought zones, after showing negative divergences by touching lower tops as the index rose higher.

Nifty's TTM P/E has moved down a bit to 28.02 - which is still much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone, and hinting at some more index upside.

Q1 (Jun '18) corporate results have shown some improvement over the previous quarter. Whether it was real improvement or caused by a lower base effect due to GST will become apparent from Q2 (Sep '18) results.

A few large-cap stocks are taking the market higher. In the process, these stocks are getting more overvalued. Near a lifetime index high, it may be better to sit on the sidelines and wait patiently for better entry opportunities. 

Tuesday, August 14, 2018

WTI and Brent Crude Oil charts: bears slowly gaining ground

WTI Crude Oil chart


The daily bar chart pattern of WTI Crude Oil has been in a down trend since touching a high of 75.30 on Jul 3. Within the down trend, oil's price consolidated sideways within a 'symmetrical triangle' pattern.

An expected downward breakout from the 'triangle' on Aug 8 was followed by a pullback to the lower edge of the 'triangle'. Bears may use the pullback to sell.

Oil's price is trading above its 200 day EMA in a bull market. However, the 20 day EMA has crossed below the 50 day EMA - which is a bearish signal in the near term. 

Daily technical indicators are in bearish zones. MACD is falling below its signal line. RSI is sliding down below its 50% level. Slow stochastic has bounced up a bit after getting support from the edge of its oversold zone.

Bullish factors like potential supply disruptions due to US sanctions on Iran oil and drop in output from Venezuela are being countered by bearish factors like a strong US Dollar and a ramp-up in production by OPEC.

On longer term weekly chart (not shown), oil's price closed below its 20 week EMA, but above its rising 50 week and 200 week EMAs in long-term bull territory. Weekly technical indicators are showing downward momentum. MACD is falling below its signal line in bullish zone. RSI is seeking support from its 50% level. Slow stochastic is falling below its 50% level.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil has been in a down trend since touching a high of 79.51 on Jul 10. Below the down trend line, oil's price rallied twice - forming bearish 'flag' patterns from which downward breakouts occurred.

Oil's price is trading above its 200 day EMA in a bull market. However, the 20 day EMA has crossed below the 50 day EMA, and both are sliding down - which is a bearish signal in the near term. 

Daily technical indicators are in bearish zones. MACD has merged with its signal line and is moving sideways. RSI is moving sideways below its 50% level. Slow stochastic has bounced up after getting support from the edge of its oversold zone.

On longer term weekly chart (not shown), oil's price closed below its 20 week EMA, but above its rising 50 week and 200 week EMAs in long-term bull territory. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has dropped to the edge of its oversold zone.

Monday, August 13, 2018

S&P 500 and FTSE 100 charts (Aug 10, 2018): bears trying to spoil the bull party

S&P 500 index chart pattern


The following remark in last week's post on the daily bar chart pattern of S&P 500 may be worth noting: "A convincing move (i.e. accompanied by strong volume support) above the 'gap' is required for the index to rise to new highs."

The downward 'gap' (formed on Jan 30) was completely filled on Mon. Aug 6. The next day, the index opened with an upward 'gap' to touch a high of 2863 - just 10 points short of the lifetime high of Jan 26 - but lacked strong volume support. 

Bears used the opportunity to stall the rally. On Fri. Aug 10, the index opened with a downward 'gap' and dropped to seek support from its 20 day EMA before closing with a weekly loss of 7 points. 

Daily technical indicators have corrected overbought conditions, and are showing downward momentum. MACD is about to cross below its signal line. RSI is falling towards its neutral zone. Slow stochastic has dropped from its overbought zone. All three showed negative divergences by failing to rise higher with the index.

Some more correction or consolidation is likely. Expect the support/resistance zone between 2780 and 2800 to provide good support on the downside. In case the index corrects further, the upper edge of the large 'symmetrical triangle' should provide stronger 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 'shooting star' candlestick that can trigger a correction. Weekly MACD and RSI are in bullish zones but not showing any upward momentum. Slow stochastic has started to correct inside its overbought zone. 

FTSE 100 index chart pattern

After touching a lifetime high of 7903.50 on May 22 '18, the daily bar chart pattern of FTSE 100 has been consolidating sideways and straddling its 20 day and 50 day EMAs. The index is trading above its gradually rising 200 day EMA in a bull market.

Bears are selling on every rise, while bulls are buying the dips. For the past two months, the index has formed a bullish pattern of 'higher bottoms and higher tops' - possibly in anticipation of a favourable BrExit deal with the EU.

Daily technical indicators continue to look neutral to bearish. MACD and RSI are in neutral zones and showing slight downward momentum. Stochastic is falling towards its 50% level.

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD has crossed below its signal line in bullish zone. RSI is falling in bullish zone. Slow stochastic is falling below its 50% level.

Sunday, August 12, 2018

Sensex, Nifty charts (Aug 10, 2018): bulls have total control

FIIs were net sellers of equity on Fri. Aug 10, but net buyers on the other four trading days last week. Their total net buying was worth Rs 9.9 Billion. DIIs were net buyers of equity on Mon., Wed. and Fri. (Aug 6,8,10) but net sellers on Tue. and Thu. Their total net buying was worth Rs 3 Billion, as per provisional figures.

India's IIP rose to a 5 months high of 7% in Jun '18 compared with an upwardly revised 3.9% in May '18 - helped largely by a lower base effect (IIP was -0.3% in Jun '17).

SIAM announced sales of domestic passenger vehicles including cars, UVs and vans showed a YoY decline of 2.71% during Jul '18 - mainly due to lower UV sales. Two-wheeler sales showed YoY growth of about 10% in Jul '18.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex touched a new high of 38076 on Thu. Aug 9, but profit booking led to a lower close on Fri. Aug 10. The index gained more than 300 points (0.8%) on a weekly closing basis.

All three EMAs are rising, and the index closed above them in a bull market. However, an interesting - and repeating - chart pattern may be forming (refer last week's post) with near-term bearish implications. 

If the repeating pattern plays out (there are no certainties that it will), the index may face a sharp correction towards its rising 200 day EMA. So, fresh lump sum investments should be avoided for now.

Daily technical indicators are showing signs of correcting overbought conditions. MACD is above its signal line inside its overbought zone, but has stopped rising. ROC has crossed below its 10 day MA and dropped from its overbought zone. RSI and Slow stochastic are moving down inside their respective overbought zones.

ROC, RSI and Slow stochastic are showing negative divergences (marked by blue arrows) by failing to rise to new highs with the index. Some correction or consolidation is likely.

Those who missed the last leg of the rally (from the Jun 28 low) should just be patient. The stock market always provides opportunities if you focus on individual stocks.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty rose to touch a new intra-week high of 11495 and closed at 11429.5 with a weekly gain of 0.6%. The index is trading above its two weekly EMAs in a bull market.

The index may be in the midst of forming a repeating pattern (refer last week's post) which can set off a correction towards its 50 day EMA. So, caution is advised.

Weekly technical indicators are inside their overbought zones. MACD is rising above its signal line. RSI is moving up inside its overbought zone. ROC and Slow stochastic are showing negative divergences by moving sideways and not rising higher with the index. 

Nifty's TTM P/E has slipped down to 27.83, which is still in overbought territory and well above its long-term average. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone, and can trigger some consolidation or correction.

Bottomline? Bulls are in complete control of Sensex and Nifty charts. Overbought conditions on technical indicators can trigger some correction or consolidation. Any falls below previous (Jan '18) tops can lead to deeper corrections towards long-term moving averages on both charts.

Friday, August 10, 2018

How ROA and ROE give a clear picture of corporate health

With all the ratios that investors toss around, it's easy to get confused. Consider return on equity (ROE) and return on assets. (ROA). Because they both measure a kind of return, at first glance these two metrics seem pretty similar. 

Both gauge a company's ability to generate earnings from its investments. But they don't exactly represent the same thing. A closer look at these two ratios reveals some key differences.

Together, however, they provide a clearer representation of a company's performance. Here we look at each ratio and what separates them.

Read more at:
https://www.investopedia.com/investing/roa-and-roe-give-clear-picture-corporate-health/ 

Wednesday, August 8, 2018

Nifty chart: a midweek technical update (Aug 08, 2018)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 11.3 Billion. DIIs were net buyers of equity on Mon. and today, but net sellers on Tue. Aug 7. Their total net selling was worth Rs 0.7 Billion, as per provisional figures.

According to an IMF report, RBI will need to gradually tighten monetary policy further due to rising inflation driven by higher oil prices, a falling Rupee, a pick-up in domestic demand and a recent hike in procurement prices of major crops by the government.

IMF also described GST as a "milestone reform" in India's tax policy but suggested a simplified dual rate structure as the multiple rates could lead to higher costs of compliance and administration.


The daily bar chart pattern of Nifty touched new highs on all three days this week as bulls have taken complete control. All three EMAs are rising, and the index is trading above them in a bull market.

Note that the 900 points rally from the Jun 28 low of 10558 is looking eerily similar to the 1100 points rally from the Dec 6 '17 low of 10033. The index had moved further and further above its rising 20 day EMA followed by a 1200 points correction.

Such sharp rallies are unsustainable for long. Keep a close watch on the (purple) up trend line drawn from the Jun 28 low. A downward breach of the trend line can trigger serious profit booking. 

Daily technical indicators are inside their respective overbought zones. MACD is rising above its signal line. RSI and Slow stochastic are rising inside their respective overbought zones, but showing negative divergences by failing to touch new highs with the index.

Nifty's TTM P/E has moved up to 28.23 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone, and hinting at some more index upside. 

A few large-cap stocks are continuing to lead the rally. Mid-cap and small-cap stocks have undergone corrections but are still trading at elevated values. More than 1500 stocks are trading below their 200 day EMAs, which is an extremely worrying sign.

No need to sell off in panic. Let your asset allocation plan guide you. Continue with monthly SIPs. But control your impulses to hunt for 'multibagger' stocks at a lifetime index high.