Wednesday, December 4, 2019

Nifty chart: a midweek technical update (Dec 04, 2019)

FIIs have turned net sellers of equity during the first three trading days this week. Their total net selling was worth Rs 36.4 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 26.2 Billion, as per provisional figures.

The IHS Markit India Manufacturing PMI rose to 51.2 in Nov '19 from a two year low of 50.6 in Oct '19. A figure above 50 indicates expansion. India's GST collection rose to Rs 1.03 Trillion in Nov '19 against Rs 0.95 Trillion in Oct '19 and Rs 0.97 Trillion in Nov '18.

Passenger vehicle sales continued to disappoint. 262,892 units were sold in Nov '19 against 284,048 units in Oct '19 and 263,455 units in Nov '18. New product launches helped reduce steep double-digit decline in sales before the festive season.


For the past five weeks, the daily bar chart pattern of Nifty had been trading within a bearish 'rising wedge' pattern - from which a downward breakout occurred on Tue. Dec 3.

The index found support at its 20 day EMA, and pulled back to the lower edge of the 'wedge' on Wed. Dec 4. All three EMAs are rising, and Nifty is trading above them in a bull market.

Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD is moving down below its falling signal line. RSI and Slow stochastic are falling towards their respective 50% levels. 

All three indicators showed negative divergences by failing to touch new highs with the index. A breach of the 20 day EMA can lead to a fall towards the support level of 11800. 

Nifty's TTM P/E is at 28.07, which is well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has moved up sharply to enter oversold zone, hinting at some near-term index upside.

Nifty rallied during Nov '19 on the back of strong FII buying. FIIs have now turned net sellers of equity during the first three trading days of Dec '19. If they continue to sell, the index can see more down side. 

The index is trading less than 1% below its lifetime high of 12159 (touched on Nov 28). Stay invested but avoid any bulk buying.

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