Tuesday, April 30, 2019

Gold and Silver charts: bears back on top

Gold chart pattern


The daily bar chart pattern of Gold appears to have formed a bearish pattern of 'lower tops, lower bottoms' during the past two months. However, bulls need not lose heart just yet.

Why? A couple of technical reasons: (1) Gold's chart indicates formation of a large 'cup and handle' pattern - with a possible upward breakout above 1350; (2) The past 2 months' trading has formed the 'handle', which itself is looking like a 'falling wedge' from which the likely breakout is upwards.

There is an important caveat. Gold's price had dropped below its 200 day EMA into bear territory, and touched a low of 1266 on Apr 23 before recovering a bit. A fall below 1260 - which is at the mid-point of the 'cup' - can negate the 'cup and handle' pattern.

Daily technical indicators are looking bearish. MACD is facing resistance from its falling signal line in bearish zone. RSI is below its 50% level. Slow stochastic has emerged from its oversold zone, but its upward momentum has stalled.

After touching a high of 98.10 on Apr 26 - its highest level in 2 years - the US Dollar index has slipped below 97.50 on Apr 2. Gold's price tends to move in the opposite direction to the Dollar index.

On longer term weekly chart (not shown), gold’s price bounced up after receiving support from its 200 week EMA, and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has fallen inside its oversold zone, and can trigger a technical bounce.

Silver chart pattern


The brief foray into bull territory during the first two months of the year appears to have come to an end for the daily bar chart pattern of Silver

Silver's price has formed a bearish pattern of 'lower tops, lower bottoms' and is trading below its three EMAs in a bear market. Throughout April '19, silver's price faced resistance from its 50 day EMA, and fell further below its falling 200 day EMA.

Daily technical indicators are in bearish zones. MACD has merged with its signal line. RSI is below its 50% level. Slow stochastic has emerged from its oversold zone, but not showing much upward momentum.

On longer term weekly chart (not shown), silver's price faced resistance from its 20 week EMA, and closed below its three weekly EMA in a long-term bear market. Weekly technical indicators are looking neutral to bearish. MACD is in neutral zone. RSI is moving sideways below its 50% level. Slow stochastic has entered its oversold zone. Some more correction is possible.

Monday, April 29, 2019

S&P 500 and FTSE 100 charts (Apr 26, 2019): bulls on top, but bears still offering resistance

S&P 500 index chart pattern


The following remark was made in last week's post on the daily bar chart pattern of S&P 500: "For the past seven weeks, the index is trading within a 'rising wedge' pattern, from which a downward breakout is likely."

There was no breakout in the week gone by, as the index kept rising along the upper edge of the 'wedge'. The rally stopped just a point short of the lifetime high of 2941 touched on Sep 21 '18.

Some hesitation and profit booking can be expected near a previous top. Whether that would lead to a breach of the twin support from the rising 20 day EMA and the lower edge of the 'wedge' remains to be seen.

Can the index form a 'double top' reversal pattern? Seems unlikely, but the possibility can't be ruled out.

Daily technical indicators are looking bullish and overbought, but not showing much upward momentum. MACD is moving sideways after merging with its signal line. RSI has re-entered its overbought zone after a brief slip below it. Slow stochastic has bounced up from the edge of its overbought zone. 

All three EMAs are rising and the index is trading above them in a bull market. However, negative divergences visible on all three indicators - which failed to touch new highs with the index - can trigger a correction.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull marketWeekly MACD is rising above its signal line in overbought zone. RSI is rising above its 50% level. Slow stochastic is well inside its overbought zone.

FTSE 100 index chart pattern


After a long Easter break, the daily bar chart pattern of FTSE 100 touched a high of 7529 on Tue. Apr 23, but failed to sustain above the 7500 level for the rest of the week.

Profit booking dropped the index towards its 20 day EMA, where it has received some support. Despite the correction, the index continues to trade well above its 200 day EMA in a bull market.

Daily technical indicators are looking bearish. MACD has crossed below its signal line in bullish zone. RSI is falling towards its 50% level. Stochastic has dropped to the edge of its oversold zone, and can trigger a technical bounce.

The index has formed a large bullish 'rounding bottom' pattern, which is more clearly visible on the 50 day EMA. Much higher levels (above 8000) are likely in the medium term.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones. MACD is rising above its signal line. RSI is above its 50% level but showing slight downward momentumStochastic is correcting inside its overbought zone.

Sunday, April 28, 2019

Whatever Happened to Emerging-Markets Stock Funds?

Emerging-markets countries are making more things, delivering more services, consuming more wares. Monies are being spent. But much of that cash does not make it to shareholders. 
It is squandered on profitless corporate expansions (empire building); or placed into government officials' pockets; or siphoned off to a CEO's friends and family.
The lesson of emerging-markets stock funds: Corporate governance matters, greatly.
Read more at:

Saturday, April 27, 2019

Sensex, Nifty charts (Apr 26, 2019): bears hanging on for dear life

FIIs were net buyers of equity on Mon., Wed. and Thu. (Apr 22, 24 and 25), but net sellers on the other two days. Their total net buying was worth Rs 45.2 Billion. DIIs were net buyers of equity on Tue. and Fri. (Apr 23 and 26) but net sellers on the other three days. Their total net selling was worth Rs 36.8 Billion, as per provisional figures.

Five years after launch, the Jan Dhan Yojana scheme has achieved a total balance of nearly Rs 1 Trillion. The scheme got a boost from demonetisation in Nov '16, and gained rapid pace in the last 6 months - leading to scepticism on the possible link between elections and spurt in balances. 

A dark storm cloud (read: rising oil prices) has gathered over the Indian stock market. Prices in petrol pumps have not been revised upwards in proportion to the rise in international oil prices due to the ongoing election. After May 23, that cloud is going to burst upon Indian consumers.

BSE Sensex index chart pattern



The following remark appeared in last week's post on the daily bar chart pattern of Sensex: "Some more consolidation near the upper edge of the trading channel, and/or a drop towards the rising 20 day EMA are possibilities."

Sometimes, the index does exactly what you expect it to do. Despite the volatility and the alternate days of sharp rise followed by equally sharp fall, all that Sensex managed was a sideways consolidation that faced resistance from the upper edge of the trading channel and received support from the 20 day EMA.

The entire trading during the month of Apr '19 has occurred within a small 'diamond' pattern, which can be a trend reversal pattern at a market top. However, a 'diamond' can also act as a continuation pattern. So, it is better to wait for the eventual breakout before taking any buy/sell decision.

A 'diamond' pattern has measuring implications. The height of the 'diamond' - about 1200 points - will be the downward or upward target from the eventual breakout point. (For a possible downward breakout, the long-term support level of 37690 - marked by blue dotted line - can come into the picture.)

Daily technical indicators are giving conflicting signals. MACD is falling below its signal line in bullish zone. ROC has crossed above its 10 day MA to enter bullish zone. RSI and Slow stochastic are at their respective neutral zones.

All four technical indicators showed negative divergences by failing to touch new highs when the index touched its lifetime high of 39487 on Apr 18. That is usually an advance warning of a possible change in trend.

FIIs are on a buying spree. A flood of liquidity can throw bearish technical signals out the window. But note that they were net sellers on two days during the week. 

Near a lifetime index high, discretion should be the better part of valour. Sensex is trading at a P/E of 29.5 - well above its long-term average. The downside risk is increasing by the day.

NSE Nifty index chart pattern



There is good (bullish) news and bad (bearish) news visible on the weekly bar chart pattern of Nifty. First, the good news: the index closed above the upward-sloping trading channel at a new lifetime high closing level of 11755.

Now, the bad news: For the second week in a row, the index failed to close above its Aug '18 top of 11760. Also, the index has formed a weekly 'hanging man' candlestick that usually has bearish implications.

Weekly technical indicators are looking bullish and overbought. MACD and ROC are rising inside their respective overbought zones. RSI and Slow stochastic are moving sideways inside their respective overbought zones - showing negative divergences by failing to touch new highs with the index.

Remember that an index can remain overbought for long periods. However, the two previous occasions when all four technical indicators were inside their overbought zones - in Jan '18 and Aug '18 - sharp corrections had followed.

History may not repeat itself - but many small investors are doomed by repeating their mistakes of becoming too bullish at a market top. 

Nifty's TTM P/E has moved up to 29.34, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone. Some more consolidation or correction is possible.

Bottomline? Sensex and Nifty charts are still hovering near the upper edges of their respective upward-sloping trading channels, and can consolidate or correct some more  before moving up further. Stay invested, but control any impulse to buy big.

Wednesday, April 24, 2019

Nifty chart: a midweek technical update (Apr 24, 2019)

FIIs were net buyers of equity on Mon. and Wed. (Apr 22 and 24), but net sellers on Tue. Their total net buying was worth Rs 8.1 Billion. DIIs were net sellers of equity on Mon. and Wed. but net buyers on Tue. (Apr 23). Their total net selling was worth Rs 5.3 Billion, as per provisional figures.

A key indicator of consumer demand, viz. auto sales, has been hit by relatively tight financial conditions, as banks have been reluctant to pass along interest rate cuts. Despite a spurt in Mar '19, India's exports remain at risk due to a slowing global economy and US-China trade war.

According to rating agency ICRA, the domestic micro finance industry is on the path of recovery, and is likely to see a growth of 20-22% in FY 2019-20.


The daily bar chart pattern of Nifty appears to have formed a large 'rising wedge' pattern from Feb '19 onwards. Such a pattern has bearish implications. So, it came as no surprise when a downward breakout occurred on Mon. Apr 22.

The index found support at its 20 day EMA, and pulled back to the lower edge of the 'wedge' today. A downward breakout from a bearish pattern, followed by a pullback ought to be a selling opportunity. 

However, investors are advised caution as FIIs are on a buying spree - even though Nifty is hovering near a lifetime high. Thu. Apr 25 is also monthly F&O expiry day, which may add to market volatility. 

Daily technical indicators are giving conflicting signals. MACD is below its falling signal line in bullish zone. RSI has bounced up after falling towards its neutral zone. Slow stochastic has fallen below its 50% level. Some more consolidation or correction is likely. 

Nifty's TTM P/E is at 29.27, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone - hinting at some more consolidation or correction.

Till election results are announced next month, expect the stock market to remain volatile. In case NDA doesn't get a majority, a knee-jerk downward reaction in Nifty can occur.

Monday, April 22, 2019

S&P 500 and FTSE 100 charts (Apr 18, 2019): bulls in charge, but bears refusing to give up

S&P 500 index chart pattern


The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "A new high is now within handshaking distance. But bears are still not ready to throw in the towel."

The index consolidated sideways within a 26 points range - touching an intra-day high of 2918 on Wed. Apr 17, but forming a 'reversal day' bar. The index closed just 2 points lower on a weekly basis.

For the past seven weeks, the index is trading within a 'rising wedge' pattern, from which a downward breakout is likely. 

Daily technical indicators are in bullish zones but showing slight downward momentum. MACD has slipped below its signal line. RSI again faced resistance from the edge of its overbought zone. Slow stochastic is correcting inside its overbought zone. 

All three EMAs are rising and the index is trading above them in a bull market. However, negative divergences visible on all three indicators - which failed to rise to new highs with the index - can trigger a correction.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market, but formed a 'doji' candlestick that can have bearish implicationsWeekly MACD is rising above its signal line bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is well inside its overbought zone.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 consolidated sideways within a 66 points range during the Easter holiday-shortened trading week. The index gained about 23 points (0.3%) on a weekly closing basis.

All three EMAs are rising and the index is trading above them in a bull market. Volumes remained low - as there was little follow-up buying before a long weekend.

Daily technical indicators are in bullish zones but showing slight downward momentum. MACD has slipped below its signal line. RSI faced resistance from the edge of its overbought zone and dropped down. Stochastic is correcting inside its overbought zone. Some correction or more consolidation is likely.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in long-term bull territory. Weekly technical indicators are looking bullish. MACD is rising above its signal line in bullish zone. RSI is above its 50% levelStochastic is well inside its overbought zone.

Saturday, April 20, 2019

Sensex, Nifty charts (Apr 18, 2019): all over for the bears, bar the shouting

In a week with two holidays, FIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 27.9 Billion. DIIs were net buyers of equity on Mon. and Tue. (Apr 15 and 16) but net sellers on Thu. Apr 18. Their total net buying was worth Rs 2.8 Billion, as per provisional figures.

The Wholesale Price Index (WPI) based inflation rose for the second consecutive month to 3.18% in Mar '19, against 2.93% in Feb '19 and 2.74% in Mar '18 - due to higher vegetable prices and rise in the 'fuel and power' category.

During FY 2018-19, India's exports and imports grew ~9% to US $331 Billion and US $507.4 Billion respectively. The trade deficit widened to $176.4 Billion against $162 Billion in FY 2017-18. However, for the month of Mar '19, the trade deficit narrowed to US $10.9 billion compared to US $13.5 Billion in Mar '18.  

BSE Sensex index chart pattern


The following comment was made in the previous post on the daily bar chart pattern of Sensex: "The index is consolidating sideways with a downward bias, and appears to have formed a small 'falling wedge' pattern from which an upward breakout is likely." 

The expected upward breakout from the 'falling wedge' occurred on Mon. Apr 15, followed by a breakout above the upward-sloping trading channel on Apr 16 - on the back of combined buying by FIIs and DIIs.

Bulls seemed to be in complete control when the index touched a new intra-day high of 39487 on Thu. Apr 18. However, profit booking ensued before a long weekend. The index formed a 'reversal day' bar (higher high, lower close) and pulled back to the top of the trading channel.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is below its falling signal line. ROC has bounced up a bit after receiving support from its neutral zone, but is below its falling 10 day MA. RSI has dropped down after facing resistance from the edge of its overbought zone. Slow stochastic's rise towards its overbought zone has stalled.

All four technical indicators are showing negative divergences by failing to touch new highs with the index. Some more consolidation near the upper edge of the trading channel, and/or a drop towards the rising 20 day EMA are possibilities.

Some uncertainty appears to be creeping into the market regarding the outcome of ongoing general elections. The lack of euphoria near a lifetime index high can be a bullish sign. However, any upsets in expected election results can change market sentiment to bearish in a hurry. 

NSE Nifty index chart pattern


Note the following comments from the previous post on the weekly bar chart pattern of Nifty: "Though FIIs were strong buyers of equity, the index closed 22 points lower for the week, and pulled back to the top of the trading channel. Such pullbacks usually provide buying opportunities."

Right on cue, Nifty rose to touch new intra-week (11856) and closing (11753) highs during a holiday-shortened week, and closed above the trading channel with a 0.9% weekly gain.

Weekly technical indicators are looking bullish and overbought. MACD is above its rising signal line, and has entered its overbought zone. ROC, RSI and Slow stochastic are inside their respective overbought zones, but are showing negative divergences by failing to touch new highs with the index.

Nifty closed well above its weekly EMAs in a bull market. It has so far failed to close above its Aug '18 top of 11760 - which is the last hurdle for bulls to regain complete control of the chart. It is just a matter of time before they do so. 

Nifty's TTM P/E has moved up to 29.33, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, hinting at some more near-term index upside.

Bottomline? Sensex and Nifty charts are hovering near the upper edges of their respective upward-sloping trading channels, and can face some more consolidation or correction before moving up further. Stay invested, keep faith in your asset allocation plan and control any impulse to go 'all in'.

Tuesday, April 16, 2019

WTI and Brent Crude Oil charts: rallies stall temporarily at resistance zones

WTI Crude Oil chart


Note the following comments from the previous post on the daily bar chart pattern of WTI Crude Oil: "The zone between 62 and 64 had acted as a support zone during Apr-Aug '18. It is likely to act as a resistance zone for a while."

Oil's price managed to move above the resistance zone, and closed above the 64 level on Apr 8 and 10. Sliding volumes showed lack of follow-up buying. Oil's price has drifted down inside the resistance zone (between 60-62).

The impending 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market. Expect oil's price to move higher after a bit of consolidation or correction.

Daily technical indicators are correcting overbought conditions. MACD is about to cross below its rising signal line in overbought zone. RSI has dropped from its overbought zone. Slow stochastic has fallen to the edge of its overbought zone. 

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory for the third week in a row. Weekly technical indicators are looking bullish. MACD is rising above its signal line in bullish zone. RSI is moving sideways above its 50% level. Slow stochastic remains well inside its overbought zone, and can trigger some more correction or consolidation.

Brent Crude Oil chart


The daily bar chart pattern of Brent Crude Oil entered the resistance zone between 70-72 as expected, but has been consolidating sideways after failing to cross above the 72 level.

Oil's price is trading above its three EMAs in bull territory. The impending 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market. 

Daily technical indicators are looking bullish and overbought. MACD is rising above its sliding signal line in overbought zone. RSI has dropped down from its overbought zone. Slow stochastic is inside its overbought zone. 

Some more consolidation is possible before oil's price makes an attempt to move above the resistance zone.

On longer term weekly chart (not shown), oil's price closed above its three weekly EMAs in long-term bull territory for the third straight week. Weekly MACD and RSI are in bullish zones. Slow stochastic is well inside its overbought zone, and can trigger some more consolidation or correction.

Monday, April 15, 2019

S&P 500 and FTSE 100 charts (Apr 12, 2019): bulls trying to wrest control

S&P 500 index chart pattern


The daily bar chart pattern of S&P 500 consolidated sideways within a 27 points range during the first four trading days, but formed an upward 'gap' to close above the 2900 level on Fri. Apr 12.

It was the first close above 2900 in more than 6 months. A new high is now within handshaking distance. But bears are still not ready to throw in the towel.

Trading pattern during the past 6 weeks has formed a bearish 'rising wedge' from which a downward breakout is likely. A correction will improve the technical 'health' of the chart - enabling the index to rise to a new high.

Daily technical indicators are looking bullish and overbought. MACD is moving sideways above its signal line. RSI is making another attempt to enter its overbought zone. Slow stochastic is well inside its overbought zone. 

All three EMAs are rising and the index is trading well above them in a bull market. However, negative divergences visible on all three indicators - which failed to rise to new highs with the index - can trigger some correction or consolidation.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the 11th week in a rowWeekly MACD is rising above its signal line bullish zone. RSI is moving up above its 50% level. Slow stochastic is well inside its overbought zone.

FTSE 100 index chart pattern


The daily bar chart pattern of FTSE 100 consolidated sideways during the week. The possibility was mentioned in last week's post.

The index touched the week's high of 7478 on Tue. Apr 9, but formed a 'reversal day' bar (higher high, lower close)  that triggered a mini correction towards the rising 20 day EMA on Thu. Apr 11.

A bounce up on Fri. Apr 12 to a close at 7437 could not prevent FTSE from sustaining a 10 points loss for the week. However, the 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.

Daily technical indicators are in bullish zones but not showing much upward momentum. MACD is sliding down towards its rising signal line. RSI remains below the edge of its overbought zone. Stochastic is inside its overbought zone. Some more consolidation is possible.

The BrExit 'can' has been kicked down the road. Since UK will now remain in the EU till Oct 31st, they will participate in the European parliamentary elections next month. This uncomfortable reality is dawning on Europeans. 

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the fourth straight week. Weekly technical indicators are looking bullish. MACD is rising above its signal line in bullish zone. RSI is rising towards its overbought zoneStochastic is well inside its overbought zone.

Sunday, April 14, 2019

Sensex, Nifty charts (Apr 12, 2019): consolidating after touching new highs

FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 43.5 Billion during the week. DIIs were net buyers of equity on Wed. Apr 10 but net sellers on the other four days. Their total net selling was worth Rs 8.8 Billion, as per provisional figures.

The Index of Industrial Production (IIP) in Feb '19 grew 0.1% - the slowest since a contraction of 0.3% in Jul '17 - due to 8.8% decline in capital goods and 0.3% decline in manufacturing. IIP was 1.4% in Jan '19 and 6.9% in Feb '18.

India's Consumer Price Index (CPI) based inflation rose to 2.86% in Mar '19 from 2.57% in Feb '19, but remained comfortably within RBI's target of 4%. For FY 2018-19, CPI declined to 3.41% from 3.59% in FY 2017-18.

BSE Sensex index chart pattern



After touching a new high of 39270 on Wed. Apr 3, the daily bar chart pattern of Sensex faced some expected profit booking, and pulled back towards its rising 20 day EMA.

The index is consolidating sideways with a downward bias, and appears to have formed a small 'falling wedge' pattern from which an upward breakout is likely. 

Daily technical indicators are giving conflicting signals. MACD has crossed below its signal line in bullish zone. ROC is below its falling 10 day MA in neutral zone. RSI is rising towards its overbought zone. Slow stochastic is falling towards its 50% level.

Despite strong buying by FIIs, the index closed 95 points lower for the week. Interestingly, the index lost more than 350 points on Wed. Apr 10, even though both FIIs and DIIs were net buyers. Some more near-term consolidation is possible.

The reason why many small investors lose money in the stock market is because they get caught up in bullish euphoria and enter near a market top. So, how does one decide whether the market will move higher or correct from here?

One way is to look at the trailing 12 months (TTM) index P/E. Historically, Sensex P/E above 22 is considered 'overbought'. Sensex P/E is above 28 now. Does that mean that the near-term index upside is limited? 

The answer is: Yes. FIIs are probably betting that earnings will catch up soon, and lower the P/E ratio. But if we get another quarter of tepid earnings from India Inc., FIIs may rush to the exit door.

NSE Nifty index chart pattern



The following comment was made in last week's post on the weekly bar chart pattern of Nifty: "The breakout above the channel still isn't a convincing one, though the index did touch a new high (by 0.8 points)."

Though FIIs were strong buyers of equity, the index closed 22 points lower for the week, and pulled back to the top of the trading channel. Such pullbacks usually provide buying opportunities.

The index is trading well above its weekly EMAs in a bull market. However, one should be cautious near a lifetime index high. A good look at what happened after Nifty touched its previous high in Aug '18 should clear any doubts. 

Weekly technical indicators are looking bullish and overbought. MACD is above its signal line and rising towards its overbought zone. ROC, RSI and Slow stochastic are inside their respective overbought zones.

Nifty's TTM P/E has reduced a bit to 29.06, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped down from the edge of its oversold zone, and can trigger near-term index upside.

Bottomline? Sensex and Nifty charts are consolidating near the upper edges of their respective upward-sloping trading channels, and may face some more consolidation or correction before moving up further. Dips can be used to add.

Wednesday, April 10, 2019

Nifty chart: a midweek technical update (Apr 10, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 29.7 Billion. DIIs were net sellers of equity on Mon. and Tue. (Apr 8 and 9) but net buyers today. Their total net selling was worth Rs 8.5 Billion, as per provisional figures.

Fall in auto sales, shortfall in direct tax collection and household savings, 7% contraction in FDI during Apr-Dec '18 are all pointing to a slow down in the Indian economy. 

According to the Federation of Indian Export Organisations (FIEO), rising protectionism, fluctuating commodity prices, inadequate availability of liquidity and slowdown in global trade will be major challenges faced by exporters.


Note the following comment from last week's technical update on the daily bar chart pattern of Nifty: "The last ten trading sessions have formed a bearish 'rising wedge' pattern, from which a downward breakout can be expected."

As expected, a breakout below the 'wedge' occurred on Thu. Apr 4. But bulls adopted a 'buy the dips' strategy that has so far prevented a correction towards the 46 points 'gap' formed on Mar 12.

Daily technical indicators are in bullish zones after correcting overbought conditions. MACD has crossed below its signal line. RSI and Slow stochastic are falling towards their respective 50% levels. Some more correction or consolidation is likely, which will improve the technical 'health' of the chart. 

Nifty's TTM P/E has fallen a little to 28.91, but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has risen to the edge of its oversold zone - hinting at some more consolidation or correction.

Annual results season and general elections have coincided. An index run-up to a new high before two major events has been followed by some profit booking. Nothing unusual with that.

The stock market has already 'discounted' a second term for the NDA government. If there is a hung parliament or an unlikely opposition victory, a sell-off can be expected. That will be a good long-term buying opportunity - if it occurs. 

Partial profit booking may be a good idea for those who were able to take advantage of the pre-election rally. Don't worry if you missed the rally. Stay invested and stick to your SIPs. The market keeps providing more opportunities to those who remain invested for the long-term.

Tuesday, April 9, 2019

Gold and Silver charts: consolidating after touching lower tops

Gold chart pattern


The daily bar chart pattern of Gold has formed a large 'cup and handle' continuation pattern. The pattern is more clearly visible on the 50 day EMA. An upward breakout can be expected after the 'handle' formation is complete.

Note that a fall below 1260 - which is at the mid-point of the 'cup' - will negate the 'cup and handle' pattern. Gold's price is trading above its rising 200 day EMA in a bull market.

Daily technical indicators are looking neutral to bearish. MACD is moving sideways below its signal line in bearish zone. RSI is facing resistance from its 50% level. Slow stochastic has emerged from its oversold zone.

After a sharp rise above 97.70 on Mar 7, followed by a sharp fall to 95.20 on Mar 20, the US Dollar index recovered to 97.10 on Apr 2. It has been consolidating between 97 and 96.50 since then. Gold's price has been consolidating as well.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are giving mixed signals after correcting overbought conditions - hinting at more consolidation or correction. 

Silver chart pattern


The daily bar chart pattern of Silver had a brief foray back above its three daily EMAs into bull territory, and an intra-day move above 15.60 before bears decided to take charge again.

Silver's price dropped below its three EMAs, and the 14.90 level on Apr 4, before pulling back towards its falling 20 day EMA. It remains below the 200 day EMA in bear territory.

Daily technical indicators are in bearish zones. MACD is facing resistance from its sliding signal line. RSI is trying to move up to its 50% level. Slow stochastic has emerged from its oversold zone.

On longer term weekly chart (not shown), silver's price is facing resistance from its 20 week EMA, and closed well below its 200 week EMA in a long-term bear market. Weekly technical indicators are looking neutral to bearish. MACD and RSI are in neutral zones. Slow stochastic is falling rapidly towards its oversold zone. Some more correction may follow.