Wednesday, December 26, 2018

Nifty chart: a midweek technical update (Dec 26, 2018)

FIIs were net sellers of equity on Mon. (Dec 24) but net buyers on Wed. (Dec 26) after the X'mas break. Their total net selling was worth Rs 5.0 Billion. DIIs were net buyers on Mon. but net sellers on Wed. Their total net buying was worth Rs 0.5 Billion, as per provisional figures.

India's low retail inflation is mainly due to food inflation falling to its lowest level since 2014. That directly relates to rural distress, because farmers are not getting adequately remunerated. No wonder they are angry, and voted against the ruling NDA in the recent state elections.



The daily bar chart pattern of Nifty shows a smart pullback from the lower Bollinger Band today, after Monday's sharp fall below the three EMAs into bear territory.

The index moved above its 200 day EMA and closed at its 50 day EMA - forming a 'reversal day' bar (lower low, higher close) - but stayed below its 20 day SMA (blue dotted line), which is the 'middle band' that sort of acts as the mid-point between the upper and lower Bollinger Bands.

The respite for bulls may be temporary. The closing/line chart of Nifty (below) shows the formation of a bearish 'rising wedge' pattern from which the likely index breakout is downwards.



Daily technical indicators are looking bearish to neutral. MACD has crossed below its signal line in bullish zone. RSI is facing resistance from its 50% level after slipping below it. Slow stochastic is falling rapidly towards its 50% level.

Nifty's TTM P/E has moved down to 25.96 - but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone - hinting at limited near-term index upside.

Prospects of a 'Santa rally' (during the period Dec 24 to Jan 2) appear bleak.

No comments: