Wednesday, December 12, 2018

Nifty chart: a midweek technical update (Dec 12, 2018)

FIIs were net buyers of equity on Mon. (Dec 10) but net sellers on Tue. & Wed. (Dec 11 & 12). Their total net selling was worth Rs 36.0 Billion. DIIs were net sellers on Mon. but net buyers on Tue. & Wed. Their total net buying was worth Rs 32.3 Billion, as per provisional figures.

CPI inflation for Nov '18 has fallen to a 16 month low of 2.33% from 3.31% in Oct '18 - thanks to lower food and fuel prices.

IIP for Oct '18 surged to an 11 months high of 8.1% from 4.5% in Sep '18 - boosted by infrastructure projects. During Apr-Oct '18, IIP grew 5.6% compared to 2.5% during Apr-Oct '17.

The following remarks were made in last week's technical update on the daily bar chart pattern of Nifty: "Note that all three EMAs have converged together...A sharp move is likely to follow...Odds favour a down move."

The expected down move started on Thu. Dec 6. The index opened trading with a 30 points downward 'gap' and dropped sharply below its three EMAs to close 180 points lower.

Nifty pulled back to the three converging EMAs on Fri. but bears used the pullback to sell. The index opened with another downward 'gap' of 40 points on Mon. Dec 10, and closed 205 points lower.

The index plummeted to an intra-day low of 10334 from the initial shock of announcement of state election results on Tue. Dec 11 morning. Short covering and some value buying ensured that the index closed 60 points higher for the day.

Formation of a 'reversal day' bar (lower low, higher close) with decent volume support enthused bulls further. The index climbed above its three EMAs and closed back in bull territory today. Note that the index stopped short of the downward 'GAP' (of Oct 4).

Daily technical indicators are turning bullish. MACD is below its falling signal line in bullish zone, but it has stopped falling. RSI has moved above its 50% level. Slow stochastic has bounced up a bit after almost falling to its oversold zone. 

Nifty's TTM P/E is at 25.98, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped from its oversold zone - hinting at some near-term upside.

Oil prices have started recovering. The Rupee is falling against the US Dollar once again. On cue, FIIs have started selling heavily again. 

Bulls have been fighting hard to prevent the 'death cross' of the 50 day EMA below the 200 day EMA, but they may be fighting a losing battle. Expect bears to reassert themselves soon.

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