Sunday, November 24, 2019

Sensex, Nifty charts (Nov 22, 2019): consolidating but showing some signs of bearishness

FIIs were net sellers of equity on Mon. and Tue. (Nov 18 and 19), but were net buyers during Wed. through Fri. (Nov 20-22). Their total net buying was worth Rs 47.1 Billion. DIIs were net buyers of equity on Mon. through Wed., but were net sellers on the last two days. Their total net buying was worth Rs 3.3 Billion.

India's urban unemployment rate during Jan-Mar '19 dropped to 9.3% from 9.9% during Oct-Dec '18. Unemployment among 15-29 year olds was 22.5% during Jan-Mar '19 against 23.7% during Oct-Dec '18.

According to a report by CEAMA, India's appliances and consumer electronics market size is expected to nearly double to Rs 1.48 Trillion by FY 25 from Rs 764 Billion in FY 19.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex has been consolidating sideways within a 'rectangle' pattern for the past three weeks. The entire consolidation has taken place above the three rising EMAs in a bull market. So, the expected index breakout from the 'rectangle' is upwards.

However, a 'rectangle' is an unreliable pattern that can sometimes act as a 'reversal' pattern. A downward breakout from the pattern is a possibility that should not be ignored. The zone between 39450 and 39250 can act as a support on the downside.

Daily technical indicators are showing downward momentum. MACD crossed below its rising signal line and has slipped down from its overbought zone. ROC is below its falling 10 day MA and has dropped into bearish zone. RSI and Slow stochastic are falling towards their respective 50% levels. 

Note that all four indicators are showing negative divergences by moving down while the the index is consolidating sideways and three EMAs are moving up. That can trigger some correction or more sideways index consolidation.

Of late, market experts have been talking about overvalued quality stocks and pockets of value among mid-cap and small-cap stocks. Small investors would do well to ignore such talk. During economic slowdowns, smaller companies and their stocks tend to underperform.

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty gained about 19 points and closed well above its three rising EMAs in a long-term bull market. However, the index is struggling to close above the psychological 12000 level, and may have formed a small 'double top' reversal pattern.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has started to slide down inside its overbought zone. RSI is moving sideways just below the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zones. More index consolidation or some correction is possible.

Nifty's TTM P/E has moved up to 27.77 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at more near-term index consolidation.  

Bottomline? Sensex and Nifty charts are consolidating sideways above their rising daily and weekly EMAs in long-term bull markets. Both indices are close to their lifetime highs, which is not a good time to buy. 

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