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'.

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