Wednesday, March 27, 2019

Nifty chart: a midweek technical update (Mar 27, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 26.3 Billion. DIIs were net sellers of equity on Mon. & Tue. (Mar 25 & 26) but net buyers today. Their total net selling was worth Rs 0.74 Billion, as per provisional figures.

According to ICRA, Indian basmati rice exports may touch an all-time high of Rs 300 Billion in FY 2018-19, on the back of strong demand from Iran and firming up of prices. The previous highest export figure was Rs 293 Billion in FY 2013-14.

A consortium of Tata Group, GIC (Singapore's sovereign wealth fund) and SSG Capital Management will invest Rs 80 Billion to buy a stake in GMR Airports Ltd, which is a unit of GMR Infrastructure Ltd. GMR operates airports at Hyderabad, Delhi, Cebu (Philippines), and is building airports at Goa and Crete (Greece).


Note the following comments from the previous technical update on the daily bar chart pattern of Nifty: "The index is just 400 points away from its lifetime high. Charts tend to have 'memory'. Profit booking can emerge as the index approaches 11760."

The index had touched an intra-day high of 11573 on Fri. Mar 22 - moving above the upper edge of the upward-sloping trading channel. It closed 116 points lower due to profit booking, and formed a bearish 'reversal day' bar (higher high, lower close).

Nifty opened with a downward 'gap' and touched an intra-day low of 11311, as profit booking continued when trading resumed on Mon. Mar 25. A pullback towards the upper edge of the trading channel during the next two days touched a lower top of 11546 today.

The index closed 101 points lower to form another 'reversal day' bar (higher high, lower close) even though FIIs and DIIs were both net buyers today. A fall to test support from the 46 points upward 'gap' formed on Mar 12 is a possibility.

Daily technical indicators are correcting overbought conditions. MACD is falling towards its rising signal line inside its overbought zone. RSI and Slow stochastic have slipped down from their respective overbought zones - hinting at some more correction.

All three EMAs are rising, and Nifty is trading above them in a bull market. It should be just a matter of time before the index rises to touch a new high. However, bears are putting up a stiff fight to defend the upper edge of the trading channel. Further upward progress may be slow.

Nifty's TTM P/E is at 28.05, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has received support at the edge of its overbought zone. Some consolidation or correction may follow.

On a longer-term weekly line chart (not shown), Nifty may be forming a large 'head and shoulders' reversal pattern, with a neckline at 10000. Such a pattern will get technically confirmed only if the index falls below 10000. A move above the lifetime high of 11760 - touched in Aug '18 - will negate the pattern.

If FIIs keep buying, a fall below 10000 will remain a distant dream. However, it is prudent to respect a large reversal pattern - till the pattern gets negated.

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