Sunday, May 26, 2019

Sensex, Nifty charts (May 24, 2019): at lifetime highs

FIIs were net sellers of equity on Wed. May 22, but net buyers on the other four days. Their total net buying exceeded Rs 53.3 Billion. DIIs were net sellers of equity on all five trading days, but could not match the pace of FII buying. Their total net selling was worth Rs 25.8 Billion, as per provisional figures.

A SEBI-constituted committee has proposed wide-ranging changes to Foreign Portfolio Investment (FPI) and FDI schemes to boost capital inflows - by improving 'ease of doing business' for large and well-regulated global entities.

A Commerce Ministry strategy paper has suggested steps for reducing import dependence from, and pushing exports to China, and attracting foreign firms that are planning to shift manufacturing bases from China. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex formed a 570 points upward 'gap' on Mon. May 20 after exit polls indicated a big victory for the NDA in the general elections.

The index closed 350 points above the 39000 level - which corresponds with the right apex of the 'diamond' pattern and was expected to provide some resistance.

During the next three days, the index oscillated about the 39000 level. On Thu. May 23 - the day election results were announced - Sensex touched a lifetime intra-day high of 40125, but formed a large 'reversal day' bar (higher high, lower close) and closed below 39000.

The index gained 1500 points (4%) on a weekly closing basis, as it ended the week at a lifetime closing high of 39435 on the back of strong buying by FIIs.

Daily technical indicators are in bullish zones. MACD is rising above its signal line. ROC has entered its overbought zone. RSI has moved above its 50% level. Slow stochastic has dropped from its overbought zone

All four indicators are showing negative divergences by failing to touch new highs with the index. Some more near-term index upside is possible, before the reality of weak corporate earnings hits bullish market sentiments. 

Caution is advised for small investors near a lifetime index high. This is a time when lot of junk shares may get dumped on unsuspecting newcomers by savvy investors. 'Invest in quality' should be the guiding principle.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty formed a 165 points upward 'gap' and touched lifetime intra-week (12041) and closing (11844) highs - gaining 3.8% on a weekly closing basis - as bulls celebrated a huge election victory by the NDA.

Weekly technical indicators are looking bullish and overbought. MACD, ROC and Slow stochastic are moving sideways below their respective overbought zones.  RSI has re-entered its overbought zone. 

All four indicators are showing negative divergences by failing to touch new highs with the index. Some correction or consolidation is possible. 

Nifty's TTM P/E has moved up to 29.44, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone, hinting at some near-term index upside.

Bottomline? Sensex and Nifty charts have closed at lifetime highs, as bulls celebrated NDA's huge election victory. Caution is suggested near a lifetime high. Stay invested, maintain trailing stop-losses and enjoy the bull ride. Use dips to add.

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