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. 

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