Sensex, Nifty charts (Jun 28, 2019): bears trying to keep bulls in check

FIIs were net buyers of equity during the first three days, but turned net sellers on the last two days. Their total net buying was worth Rs 9.6 Billion. DIIs were net sellers of equity on Wed. (Jun 26), but net buyers on the other four days. Their total net buying was worth Rs 16.9 Billion, as per provisional figures.

For the month of Jun '19, FIIs were net sellers of equity worth Rs 6.9 Billion. It was their  second straight month of net selling after being net buyers during Jan-Apr '19. DIIs were net buyers of equity worth Rs 36.4 Billion during Jun '19. It was their second straight month of net buying after being net sellers during Feb-Apr '19.

India's fiscal deficit during Apr-May '19 stood at Rs 3.66 Trillion, which touched 52% of the budget estimate for FY 2019-20. The deficit was at 55.3% of the budget estimate for FY 2018-19 during Apr-May '18.

Current account deficit (CAD) during Jan-Mar '19 narrowed sharply to US $4.6 Billion from $17.7 Billion during Oct-Dec '18, and $13 Billion during Jan-Mar '18 - due to a lower trade deficit and strong Foreign Portfolio inflows. However, trade deficit for FY 2018-19 increased to $180.3 Billion from $160 Billion in FY 2017-18.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex consolidated sideways with an upward bias during the week. It bounced up after getting good support from its 50 day EMA on Tue. Jun 25, and closed above its 20 day EMA.

On Thu. Jun 27, it touched a high of 39817 - its highest level in two weeks - but formed a small 'reversal day' bar (higher high, lower close). Profit booking on the last trading day of the month dropped the index to its 20 day EMA. 

Sensex closed well above its rising 200 day EMA in a bull market, and gained 200 points (0.5%) on a weekly closing basis.

Daily technical indicators are looking neutral to bearish. MACD is sliding below its falling signal line in bullish zone. ROC is facing resistance from its '0' line after crossing above its 10 day MA. RSI has dropped down after facing resistance from its 50% level. Slow stochastic has just about managed to cross above its 50% level. 

Some more consolidation is likely. The impending budget is causing some jitters in the market, leading to increased volatility. 

In case the budget on June 5 belies market expectations, a part or complete filling of 'Gap 2' (formed on May 20) may be on the cards. Stay cautiously optimistic.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed about 65 points higher with a weekly gain of 0.55%, after closing lower for three straight weeks. The index has closed above the upward 'gap' (formed on May 20) for six weeks in a row.

By trading above its weekly EMAs and the up trend line, Nifty has remained in a bull market despite six weeks of sideways consolidation.

Weekly technical indicators are looking neutral to bearish. MACD has slipped down to merge with its signal line at the edge of its overbought zone. ROC is below its 10 week MA and has dropped to its neutral zone. RSI and Slow stochastic have dropped from their respective overbought zones, but remain in bullish zones. Some more consolidation or correction is likely. 

Nifty's TTM P/E has moved down to 28.98, which is still well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone, hinting at near-term index consolidation.

Bottomline? Sensex and Nifty charts have been consolidating after touching lifetime highs. Any pre-budget rally can be used to book profits. Avoid bottom fishing among small/mid caps. Stick to quality large-caps.

Understanding 'Buy the Dips' strategy

Buy the dips refers to purchasing an asset after it has declined in price. Buying the dips has different contexts, and different odds of working out, depending on the situation in which it is utilized. 

Some traders may say they are buying the dips if an asset is in a long-term strong uptrend. They hope the uptrend continues after the dip or drop. 

Others may use the phrase when no uptrend is present, but they believe an uptrend may occur in the future. Therefore, they are buying when the price drops in order to profit from a potential future price rise.

Read more at:
https://www.investopedia.com/terms/b/buy-the-dips.asp

Nifty chart: a midweek technical update (Jun 26, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth about Rs 14.7 Billion. DIIs were net sellers of equity on Wed., but were net buyers on Mon. and Tue. (Jun 24 and 25). Their total net buying was worth Rs 13.1 Billion, as per provisional figures.

In May '19, India's finished steel exports (319,000 Tonnes) fell 28% compared to May '18. It was at the lowest level since Apr '16. Exports to EU dropped 55%. Exports to Nepal, Sri Lanka, Malaysia were also substantially lower. The 25% import tariff has effectively closed the US market.

Currency notes in circulation stood at Rs 21.7 Trillion in end-May '19, showing an increase of more than 22% over the pre-demonetisation level of Rs 17.7 Trillion - according to a written reply in the Rajya Sabha by the Finance Minister. 

The following remark appeared in last week's technical update on the daily bar chart pattern of Nifty: "Slow stochastic has fallen inside its oversold zone, and can trigger an index pullback towards the 20 day EMA."

The index oscillated between its 20 day and 50 day EMAs during the past 4 trading sessions before moving up to close well above its 20 day EMA today. Is this the beginning of a pre-budget rally? If it is, it will provide a good opportunity to book some profits.

Daily technical indicators are looking neutral to bearish. MACD is moving sideways below its falling signal line in bullish zone. RSI is moving sideways along its 50% level. Slow stochastic has emerged from its oversold zone, and showing upward momentum.  

Nifty's TTM P/E has moved up to 29.09, inside overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen from its oversold zone. Some near-term upside is possible.

Another eminent economist - Deputy RBI Governor Dr Acharya - has recently put in his papers. He has followed in the footsteps of Dr Rajan, Dr Panagriya, Dr Patel and Dr Subramanian. 

Some of the best Indian minds - who hold teaching posts in top US universities - have been unable to compromise with the dictats of the present dispensation. It doesn't augur well for the future of India's economy.

A deficient monsoon is exacerbating agrarian distress. India's consumption story, which had boosted economic growth during the past couple of years, is shuddering to a halt. For the next two years, wealth protection should take priority over wealth building. 

Gold and Silver charts: rallying after upward breakouts

Gold chart pattern

The following remark was made in the previous post on the daily bar chart pattern of Gold: "Gold's price may consolidate or correct towards 1310-1320 zone before it can resume its up move."

On Jun 11, gold's price touched a low of 1319, but formed a 'reversal day' bar (lower low, higher close) that led to a strong rally. After a brief hesitation around 1345 - which happens to be the level of the 'rim' of the 'cup and handle' pattern - gold's price shot up like a rocket past 1400.

Daily technical indicators are looking quite overbought. MACD has risen sharply inside its overbought zone. RSI is rising inside its overbought zone. Slow stochastic is also rising inside its overbought zone, but showing negative divergence by touching a lower top.

Gold's price is trading well above its three rising EMAs in a bull market. However, the rally has been a bit too steep. Some profit booking is likely to emerge soon. 

The US Dollar index dropped vertically below 95.50 on Jun 24, triggering the sharp rally in Gold's price. The price break out above the 'rim' (1345) has technically confirmed the 'cup and handle' pattern - with an upward target above 1500.

On longer term weekly chart (not shown), gold’s price closed well above its three weekly EMAs in long-term bull territory. Weekly technical indicators are looking bullish and overbought. Some price correction/consolidation may follow.

Silver chart pattern

The daily bar chart pattern of Silver had been struggling to overcome resistance from its 200 day EMA after breaking out above the (purple) down trend line. Finally, on Thu. Jun 20, silver's price did break out above its 200 day EMA into bull territory.

As often happens after a breakout, a pullback down to the 200 day EMA followed on Fri. Jun 21. Silver's price then bounced up to close near 15.40 - giving some relief to bulls.

Daily technical indicators are in bullish zones. MACD is rising above its signal line. RSI has slipped down after facing resistance from the edge of its overbought zone. Slow stochastic is consolidating at the edge of its overbought zone. Some price consolidation/correction can be expected.

On longer term weekly chart (not shown), silver's price closed above its 20 week and 50 week EMAs, but well below its sliding 200 week EMA in a long-term bear market. Weekly technical indicators are turning bullish. 

S&P 500 and FTSE 100 charts (Jun 21, 2019): bulls regaining control?

S&P 500 index chart pattern

The following comment appeared in last week's post on the daily bar chart pattern of S&P 500: "Some more consolidation is possible before the index attempts to scale a new high."

The sideways consolidation continued on Mon. Jun 17. Next day, the index formed an upward 'gap' that triggered a dash towards the previous (May 1) top of 2954. On Thu. Jun 20, the index touched a new high of 2958, but closed exactly at its previous top of 2954.

On Fri. Jun 21, the index touched another new high of 2964 with a volume surge, but closed lower at 2950 - forming a small 'reversal day' bar (higher high, lower close). A 'reversal day' bar at a market top can trigger a correction.

Failure to close convincingly above its previous top leaves the door open for the formation of a 'double top' reversal pattern - which will get confirmed only if the index falls below 2729 (the low touched on Jun 3).

Daily technical indicators are in bullish zones, but only MACD is showing some upward momentum. MACD is rising above its signal line in bullish zone. RSI has slipped down after facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways well inside its overbought zone. 

All three indicators are showing negative divergences by failing to touch new highs with the index. Expect bears to put up a fight to defend the 2954 level. But it might be a 'fight for a cause long ago forgotten'. The index closed above its three rising EMAs in a bull market.

On longer term weekly chart (not shown), the index closed well above its three weekly EMAs in a long-term bull market. Weekly technical indicators are moving up in bullish zones, but showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 bounced up after receiving good support from its 20 day EMA, and rose to touch the week's high of 7469 on Tue. Jun 18. Bears got into the act, preventing the index from making further upward progress. 

The volume spike on Fri. Jun 21 may be the sign of a selling climax. The index managed to close above the 7400 level and its three EMAs in bull territory, with a weekly gain of 0.8%.

Daily technical indicators are in bullish zones but only MACD is showing upward momentum. MACD is rising above its signal line in bullish zone. RSI is moving sideways above its 50% level. Stochastic has dropped to the edge of its overbought zone after re-entering it.

A convincing close above the previous (Apr 23) top of 7529 is required for bulls to regain control of the chart, and technically confirm completion of a bullish 'cup and handle' pattern (clearly visible on the 50 day EMA).

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the third straight week. Weekly technical indicators are turning bullish. MACD is about to cross above its signal line in bullish zone. RSI and Stochastic are rising above their respective 50% levels. Some more upside seems likely.

Sensex, Nifty charts (Jun 21, 2019): consolidating, but showing bearish reversal signs

FIIs were net buyers of equity on Tue. (Jun 18), but net sellers on the other four days. Their total net selling was worth Rs 15.7 Billion. DIIs were net sellers of equity on Wed. (Jun 19), but net buyers on the other four days. Their total net buying was worth Rs 30.2 Billion, as per provisional figures.

USA has warned that it would be compelled to take some "additional action" against India over "unfair" trade practices as the two countries have made "no headway" on these issues.

Sovereign Wealth funds and State Pension funds are piling into India, buying stakes in everything from airports to renewable energy, attracted by political stability, reforms and a growing middle class.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex consolidated sideways during the week - getting good support from its 50 day EMA - but lost about 250 points (0.6%) on a weekly closing basis. The index is trading well above its rising 200 day EMA in a bull market.

However, on the closing (line) chart (see below), the index had broken out below a small 'head and shoulders' reversal pattern (with purple neckline), followed by a pullback towards the purple neckline - and may be forming a larger complicated 'head and shoulders' pattern with a green neckline.

Why complicated? Because the 'head' of the larger 'head and shoulders' pattern is itself a 'head and shoulders' pattern. Note that the green neckline has not been breached yet. Bulls can be expected to put up a strong defense here.

What if the green neckline gets breached? The larger complicated 'head and shoulders' pattern will get technically confirmed. Sensex can then be expected to move down to test support from its rising 200 day EMA.  

Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. ROC faced resistance from its '0' line and dropped back into bearish zone. RSI is below its 50% level. Slow stochastic has emerged weakly from its oversold zone. 

Some more correction, and a part or complete filling of 'Gap 2' (formed on May 20) may be on the cards.

Formation of a reversal pattern - specially one occurring near a lifetime high - should be treated with respect and caution. The up trend from the Oct '18 low and the bull market are intact. So, there is no need to sell in a panic. But buying can be restricted for the time being.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed lower for the third week in a row as it dropped down to test support from the upward 'gap' formed on May 20. The index closed above its weekly EMAs in a bull market, but has formed a 'rounding top' reversal pattern.

Weekly technical indicators are looking bearish. MACD is about to fall from its overbought zone. ROC is below its 10 week MA and has fallen to its neutral zone. RSI and Slow stochastic have dropped from their respective overbought zones. Some more consolidation or correction is possible. 

After touching a high of 29.90 on Mon. Jun 3, Nifty's TTM P/E has moved down to 28.99, which is still well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply inside its oversold zone. Some near-term index upside or consolidation is likely.

Bottomline? Sensex and Nifty charts are consolidating after touching lifetime highs, but showing some bearish reversal signs. Any pre-budget rally can be used to book profits. Avoid the urge to do bottom fishing among small/mid caps.

How does the dividend discount method (DDM) work?

The DDM is very similar to the discounted cash flow (DCF) valuation method; the difference is that DDM focuses on dividends. 

Just like the DCF method, future dividends are worth less because of the time value of money. Investors can use the DDM to price stocks based on the sum of future income flows by the risk-adjusted required rate of return.

Read more at:
https://www.investopedia.com/ask/answers/042415/when-can-i-use-dividend-discount-method-ddm-value-stock.asp

Nifty chart: a midweek technical update (Jun 19, 2019)

FIIs were net buyers of equity on Tue. (Jun 18), but were net sellers on Mon. and Wed. (Jun 17 and 19). Their total net selling was worth about Rs 4 Billion. DIIs were net sellers of equity on Wed., but were net buyers on Mon. and Tue. Their total net buying was worth Rs 13.3 Billion, as per provisional figures.

According to data compiled by Bloomberg, India's non-bank finance companies (NBFCs) have a record Rs 1.1 Trillion of local currency bonds due next quarter. Refinancing the obligations may pose a challenge.

India recorded FDI inflow of US $61 Billion during FY 2017-18 against $60.2 Billion in FY 2016-17, according to the Ministry of Commerce & Industry.

Note the following comments from last week's technical update on the daily bar chart pattern of Nifty: "Charts don't 'like' unfilled gaps. Most gaps get filled sooner than later - though some gaps may never get filled. A part or complete filling of the May 20 'gap' will make the chart technically 'healthy', enabling the index to rise higher."

Nifty had formed a 165 points upward 'gap' on May 20, and rose to touch a lifetime high of 12103 on Jun 3. It has since corrected all the way down towards the 'gap'. 

The 50 day EMA has provided good support this week. The index continues to trade well above its rising 200 day EMA in a bull market.

A part or complete filling of the 'gap', followed by a resumption of the bull rally is the more likely Nifty direction. However, a remote bearish possibility should also be kept in mind: If Nifty forms a downward 'gap' and falls below the May 20 upward 'gap', a bearish 'island reversal' pattern will get formed.

Daily technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. (Note that the signal line has formed a bearish 'rounding top' pattern.) RSI is moving sideways below its 50% level. Slow stochastic has fallen inside its oversold zone, and can trigger an index pullback towards the 20 day EMA. 

Nifty's TTM P/E has moved down to 28.91, but remains in overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone, hinting at some near-term index upside.

A delayed monsoon is adding to the growth woes of the economy. Some out-of-the box thinking and reform measures are required to push the economy back onto the growth track. But it may be better to have moderate expectations from the current regime.

WTI and Brent Crude Oil charts: consolidating near support zones

WTI Crude Oil chart

The following comment appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "The imminent 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market."

The 'death cross' (marked by grey oval) has ended the brief foray of oil's price into bull territory during Apr-May '19. The support zone between 50-52 has provided temporary solace to bulls.

Daily technical indicators are looking bearish and oversold. MACD is moving sideways below its signal line in oversold zone. RSI has emerged weakly from its oversold zone. Slow stochastic has dropped back inside its oversold zone. 

All three EMAs are falling, and oil's price is trading below them in a bear market. Bears are likely to continue with their 'sell on rise' strategy.

On longer term weekly chart (not shown), oil's price has closed well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are in bearish zones, and showing downward momentum. 

Brent Crude Oil chart

For the past two week's, the daily bar chart pattern of Brent Crude Oil has consolidated sideways in a range between 60-64. The 'death cross' of the 50 day EMA below the 200 day EMA (marked by grey oval) has technically confirmed a return to a bear market.

The support zone between 58-60 has helped oil's price to stabilise after a steep fall. However, it may only be a temporary respite for bulls. A slowing global economy will not be able to boost oil demand. Further downside is likely.

Daily technical indicators are looking bearish and oversold. MACD is moving sideways below its signal line in oversold zone. RSI has bounced up weakly from the edge of its oversold zone. Slow stochastic has dropped back inside its oversold zone. 

On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory for the third week in a row. Weekly technical indicators are in bearish zones, and showing downward momentum - hinting at some more consolidation or correction.

S&P 500 and FTSE 100 charts (Jun 14, 2019): bears trying their best to spoil the bull party

S&P 500 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of S&P 500: "The week's rally was accompanied by sliding volumes. A pullback towards the down trend line is a possibility."

The index touched an intra-day high of 2911 on Tue. Jun 11, but pulled back towards the (purple) down trend line, forming a 'reversal day' bar (higher high, lower close).

A sideways consolidation in a range of 20 points (2875 - 2895) followed. The index closed above its three EMAs in a bull market, and eked out a 0.5% weekly gain.

Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD has crossed above its signal line to enter bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways inside its overbought zone. 

Some more consolidation is possible before the index attempts to scale a new high.

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 indicating indecision among bulls and bears. Weekly technical indicators are looking bullish to neutral. MACD is moving sideways below its signal line. RSI has moved above its 50% level after falling below it. Slow stochastic has moved up to its 50% level after falling below it.

FTSE 100 index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of FTSE 100: "Near-term index upside may be limited. Sliding volumes during last week's rally can encourage bears to 'sell on rise'."

The index touched an intra-day high of 7421 and closed just below 7400 on Tue. Jun 11 - negating the bearish 'head and shoulders' pattern (refer last week's post). Bulls failed to press home their advantage, and bears stepped in to sell as expected.

The index received support from its 20 day EMA, and closed above its three EMAs in bull territory. Strong volumes on the two down days indicate bears are in no mood to give up without a fight.

Daily technical indicators are in bullish zones but showing downward momentum. MACD crossed above its signal line to enter bullish zone, but is turning down. RSI is falling towards its 50% level. Stochastic has slipped down from its overbought zone.

A fall and a test of support from the 200 day EMA may be on the cards.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory, but formed a 'shooting star' candlestick pattern that can trigger some correction or consolidation . Weekly technical indicators are in bullish zones, but not showing any upward momentum. 

Sensex, Nifty charts (Jun 14, 2019): profit booking emerges near lifetime highs

FIIs were net buyers of equity on Mon., Tue. and Thu. (Jun 10, 11 and 13), but net sellers on Wed. and Fri. (Jun 12 and 14). Their total net selling exceeded Rs 8.0 Billion. DIIs were net buyers of equity on Mon., Wed. and Fri., but net sellers on the other two days. Their total net buying was worth Rs 2.2 Billion, as per provisional figures.

India's CPI based retail inflation rose to a 7 months high of 3.05% in May '19 from a revised 2.99% in Apr '19. However, WPI based wholesale inflation fell to a 22 months low of 2.45% in May '19 from 3.07% in Apr '19. 

The Index of Industrial Production (IIP) grew to a six months high of 3.4% in Apr '19 against 0.4% in Mar '19, but was lower than 4.5% in Apr '18. Some experts have questioned the veracity and sustainability of the improved Apr '19 data.

India's trade deficit widened to US $15.4 Billion in May '19 against $14.6 Billion in May '18. While exports grew 4% to $30 Billion, imports grew 4.3% to 45.4 Billion.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched a lower top of 40066 on Tue. Jun 11 and corrected down to seek support from its 20 day EMA. The index is trading well above its rising 200 day EMA in a bull market.

Some consolidation or correction near a lifetime index high is only to be expected. It is always a good idea to take some profit off the table and lock it in fixed income instruments (but don't touch debt funds with a barge-pole).

Daily technical indicators are turning bearish after correcting overbought conditions. MACD has crossed below its signal line in bullish zone. ROC is falling below its 10 day MA and dropped into bearish zone. RSI and Slow stochastic have fallen to their respective neutral zones. 

All four technical indicators had showed negative divergences by failing to touch new highs with the index on Jun 4. Some more correction, and a part or complete filling of 'Gap 2' (formed on May 20) will improve the technical 'health' of the chart - enabling Sensex to move higher.

Expect the index to meander without a clear direction till the budget on July 5. There may even be a 'managed' pre-budget rally. Use it to book profits.  

The state of the financial system - banks, NBFCs, HFCs (barring a few exceptions) - doesn't look encouraging at all. Frauds and defaults are being discovered on a daily basis. No one is sure how deep the rot is. The government seems to be in denial - trying to put positive spins on negative data.

Small investors should be extra careful about where they invest their money. Choose quality stocks, or the best equity funds - even if they appear expensive. Companies like Asian Paints, HUL, HDFC Bank, TCS have management quality and cash to survive downturns. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a lower top and closed 47 points (0.4%) lower for the week. However, the index is trading well above its rising weekly EMAs in a long-term bull market.

The index has spent four weeks above the upward 'gap' formed on the week beginning May 20, but has failed to move higher. It may test support from the 'gap' and fill it partly or completely. The 20 week EMA has entered the 'gap' zone, and should provide additional support to the index. 

Weekly technical indicators are showing bearish signs. MACD is moving sideways inside its overbought zone. ROC is falling below its 10 week MA towards neutral zone. RSI and Slow stochastic are poised to fall from their respective overbought zones. 

All four indicators had showed negative divergences by failing to touch new highs with the index in the previous week. Some more consolidation or correction is possible. But don't expect a deep correction - unless the budget on July 5 badly disappoints the market.

After touching a high of 29.90 on Mon. Jun 3, Nifty's TTM P/E has moved down to 29.24, which is still well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone after briefly falling from it. Some near-term index upside is likely.

Bottomline? Sensex and Nifty charts continue to consolidate after touching lifetime highs. A stalling economy, debt crisis of NBFCs/HFCs and weak earnings growth of India Inc. have been 'discounted' by the market. A disappointing budget may derail bullish hopes. Stay invested with trailing stop-losses. Ignore optimistic 'buy' calls from brokerages.

How can an investor determine the efficiency of a company's working capital management?

There are a number of tools that determine how efficiently a company is managing its working capital, principally by looking at measures of inventory and cash flow.

Analysts and investors look at a company's working capital to determine its overall efficiency and financial health. Working capital is essentially the money necessary for a company to maintain its operations on a day-to-day basis. It is composed of a number of components, the three most important being:

• Accounts payable
• Accounts receivable
• Inventory levels

Read more at:

https://www.investopedia.com/ask/answers/041015/how-can-investor-determine-efficiency-companys-working-capital-management.asp

Nifty chart: a midweek technical update (Jun 12, 2019)

FIIs were net buyers of equity on Mon. and Tue. (Jun 10 and 11), but were net sellers today. Their total net selling was worth Rs 7.4 Billion. DIIs were net sellers of equity on Tue., but were net buyers on Mon. and today. Their total net buying was worth Rs 2.9 Billion, as per provisional figures.

Reigniting the debate on the accuracy of India's GDP growth numbers, the former Chief Economic Advisor, Arvind Subramanian mentioned in a research paper that analyses data on 17 different economic indicators that India's real GDP growth was only 3.5-5.5% during FY 2012-2017.

The Prime Minister's Economic Advisory Council has refuted the claims made by the former CEA in his research paper. However, the jobless economic growth on the ground may be confirming - rather than refuting - Mr Subramanian's findings.

The daily bar chart pattern of Nifty had touched a new high of 12103 on Jun 3. The index corrected sharply and tested support from its rising 20 day EMA on Jun 7. It has been consolidating since then, and touched a lower top of 12000 on Jun 11.

All three EMAs are rising, and the index is trading above them in a bull market. The index should rise to a new high soon. However, the 165 points upward 'gap' formed on May 20 remains a concern.

Charts don't 'like' unfilled gaps. Most gaps get filled sooner than later - though some gaps may never get filled. A part or complete filling of the May 20 'gap' will make the chart technically 'healthy', enabling the index to rise higher.

Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD is seeking support from its signal line in overbought zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways above its 50% level after falling from its overbought zone. 

All three indicators showed negative divergences by failing to touch new highs when the index touched its lifetime high on Jun 3. Some more consolidation or correction may follow.

After touching a high of 29.90 on Jun 3, Nifty's TTM P/E has moved down to 29.45, which is in overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone, hinting at some near-term consolidation.

The debt crisis in the NBFC/HFC segment seems to be getting worse, and is having a negative spill-over effect on the banking sector. With the financial system in turmoil, how will economic growth get funded?

The consumption sector that is dependent on loans from banks/NBFCs - like automobiles, real estate - is in doldrums. It will be too much to expect the new Finance Minister to perform a miracle in her first budget and restore the economy back on the growth track.

Stay invested, but stay nimble. Book profits where available, and invest it in bank FDs to protect capital before interest rates fall further. 

Gold and Silver charts: correcting after upward breakouts

Gold chart pattern

Note the following comments made in the previous post on the daily bar chart pattern of Gold: "Recent volume spikes on up days indicate buying interest...Gold's price may make another attempt to break out above the 'wedge'."

This time, the breakout above the 'falling wedge' (which is also the 'handle' of a large 'cup and handle' pattern) was successful. Gold's price shot up like a rocket to test its previous (Feb '19) top of 1350, but profit booking dropped it to a close below 1330.

Daily technical indicators are looking overbought. MACD has risen sharply to enter its overbought zone. RSI has fallen from its overbought zone. Slow stochastic is sliding down inside its overbought zone. Gold's price may consolidate or correct towards 1310-1320 zone before it can resume its up move.

After touching a high of 98.26 on May 23 - its highest level in 2 years - the US Dollar index dropped to a low of 96.40 on Jun 7 before recovering to 96.70. The fall may have triggered the upward breakout in Gold's price.

On longer term weekly chart (not shown), gold’s price closed well above its three weekly EMAs in long-term bull territory. Weekly technical indicators are in bullish zones. MACD and Slow stochastic are showing upward momentum. RSI is showing downward momentum - hinting at some price consolidation.

Silver chart pattern

After spending three months below the (purple) down trend line, the daily bar chart pattern of Silver managed to breakout above the down trend line and its 20 day and 50 day EMAs, with strong volume support.

However, resistance from the sliding 200 day EMA proved to be too strong. Bullish hopes took a sever knock as silver's price dropped sharply below its 20 day and 50 day EMAs to close in bear territory.

Daily technical indicators are turning bearish. MACD is facing resistance from its '0' line. RSI has dropped below its 50% level. Slow stochastic has turned down after facing resistance from the edge of its overbought zone.

On longer term weekly chart (not shown), silver's price is trading below its three sliding weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones and not showing much upward momentum. Some more correction or consolidation is likely.