Wednesday, October 24, 2018

Nifty chart: a midweek technical update (Oct 24, 2018)

FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 29 Billion. DIIs were net buyers on all three days. Their total net buying was worth Rs 22.9 Billion, as per provisional figures.

The net direct tax collection in India grew by 15.7% to Rs 4.89 Trillion YoY during the period Apr - Oct 3rd week, 2018 - meeting 42.5% of the full fiscal year target of Rs 11.5 Trillion.

Tight monetary conditions for NBFCs may soon begin to hit the economy as funds for consumption and investment are slowly getting squeezed. Sale of motorcycles, tractors, plywood and cement have slowed in the past few weeks.



The daily bar chart pattern of Nifty touched an intra-day low of 10102 on Tue. Oct 23 - its lowest level since Mar 28 '18. All gains made during Apr-Aug '18 got wiped out during Sep-Oct '18. The index is trading well below its three falling EMAs in bear territory. 

Daily technical indicators are in bearish zones, and are not showing any upward momentum. MACD is facing resistance from its falling signal line inside its oversold zone. RSI is getting support from the edge of its oversold zone. Slow stochastic has re-entered its oversold zone.

Note that all three indicators showed positive divergences by touching slightly higher bottoms, when the index dropped lower. That may have triggered today's upward bounce. Is it possible that the index has formed a small 'double bottom' reversal pattern? 

Technically, such a pattern will get confirmation only if Nifty manages to rally past its Oct 17 top of 10710 (where it had faced strong resistance from its falling 20 day SMA and had dropped towards the lower Bollinger Band). The odds for such a rally doesn't favour bulls.

Nifty's TTM P/E has moved down to 24.60, but still remains higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone, suggesting some near-term upside.

Oil's price has come down from lofty levels and Rupee's fall against the US Dollar has temporarily stalled. That has provided brief respite to bulls. But FIIs are still in exit mode - so, more downside is likely.

No comments: