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.

No comments: