Sensex, Nifty charts (Jan 18, 2019): unconvincing upward breakouts from 'diamond' patterns

FIIs were net buyers of equity on Tue. and Thu. (Jan 15 and 17) but net sellers on the other three trading days. Their total net buying was worth Rs 0.54 Billion. DIIs were net sellers of equity on Thu. and Fri., but net buyers during the first three days. Their total net buying was worth Rs 5.2 Billion, as per provisional figures.

As per data available till Sep '18, the total debt of the Indian government has increased by more than 49% to Rs 82 Trillion during NDA's 4.5 year stint - from Rs 54.9 Trillion in Jun '14.

Volatility in crude oil prices has hit synthetic textile manufacturers hard, with frequent change in buying behaviour observed for both raw material and finished product segments.

BSE Sensex index chart pattern

In last week's post on the daily bar chart pattern of Sensex, the following four possible outcomes of a breakout from the 'diamond' pattern was mentioned: a downward breakout, an upward breakout, a 'false' upward/downward breakout, and a sideways move through the right 'apex'.

On Mon. Jan 14, the index dropped below the 'diamond' and its 50 day EMA intra-day, but recovered to close above its 50 day EMA inside the 'diamond'. That negated the expected downward breakout possibility.

On Tue. Jan 15, the index had an upward breakout and a close above the 'diamond' - on the back of combined FII and DII buying - raising bullish hopes. However, trading volumes (not shown) was not significantly higher - which is required for technical confirmation of an upward breakout.

There was little follow-up buying during the last three days of trading, as the index consolidated sideways with a slight upward bias. The index pulled back to the top of the 'diamond' on Thu. and Fri, attracting some buying.

By failing to press home their advantage following the upward breakout, bulls have left the door open for a possible 'false' upward breakout. The index is above its three EMAs in bull territory. However, caution is advised as any correction from current levels can trigger the next leg of the down move from the Aug 29 '18 top.  

Daily technical indicators are in bullish zones but not showing much upward momentum. MACD has managed to move above its signal line. ROC has turned down after facing resistance from the edge of its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has started to slide down inside its overbought zone.

Market fundamentals are not conducive for bulls. Inflation is falling due to lower food prices, which means agrarian distress is increasing. The Rupee is depreciating against the US Dollar while oil price is moving up - worsening India's balance of payment situation.

Opposition parties are joining hands in a bid to counter the BJP in the upcoming general elections. If they manage to retain their alliance till voting time, an upset may be on the cards. The stock market doesn't seem to have 'priced in' that possibility yet.

On the global front, uncertainty due to BrExit and US-China trade war will keep FIIs from committing to emerging markets in a big way. Without their buying support, the index can succumb to gravity.

NSE Nifty index chart pattern

After closing inside a 'diamond' pattern for 11 straight weeks, the weekly bar chart pattern of Nifty managed to breakout and close above the 'diamond', but only after an intra-week fall below it.

Note that there was no significant increase in trading volumes, which is required to technically confirm an upward breakout. The fact may encourage bears to mount an attack and turn the upward breakout into a 'false' one.

Weekly technical indicators are looking bullish but not showing much upward momentum. MACD has moved above its signal line to touch its '0' line. ROC has dropped from its overbought zone, but is above its rising 10 week MA. RSI is moving sideways above its 50% level. Slow stochastic is poised to enter its overbought zone. 

Nifty's TTM P/E has moved up to 26.19, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has bounced up sharply after falling almost to the edge of its overbought zone,  and can limit near-term index upside.

Bottomline? Sensex and Nifty charts have broken out above 'diamond' patterns, but the breakouts have not been convincing without accompanying volume surges. Both indices are trading above their long-term moving averages in bull territories. However, resumptions of corrective down moves from Aug '18 tops can't be ruled out. If you must buy, stick to the highest quality stocks.

(Note: Learn how to choose fundamentally strong stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered to blog visitors, followers and subscribers for two more days only - till Jan 21, 2019. Contact me for details: mobugobu@yahoo.com.)

Nifty chart: a midweek technical update (Jan 16, 2019)

FIIs were net buyers of equity on Tue. (Jan 15), but net sellers on Mon. & Wed. (Jan 14 & 16). Their total net selling was worth Rs 6.6 Billion. DIIs were net buyers on all three trading days. Their total net buying was worth Rs 12.5 Billion, as per provisional figures.

India's wholesale and retail inflation eased further in Dec '18 on the back of cooling food and fuel prices. CPI-based inflation slipped to an 18 months low of 2.19% from 2.33% in Nov '18 and 5.21% in Dec '17. WPI-based inflation was at an 8 months low of 3.8% against 4.64% in Nov '18 and 3.58% in Dec '17. 

A vicious battle for supremacy is raging on the daily bar chart pattern of Nifty, with no quarter given and none asked.

On Mon. Jan 14, the index dropped below the 'diamond' pattern - within which it has been trading since the beginning of Nov '18 - and even slipped below its 200 day EMA into bear territory intra-day. 

Just when it looked like bears were going to dominate, bulls bought the intra-day dip and ensured that the index closed just within the 'diamond'. On Tue. Jan 15, the index broke out and closed above the 'diamond' pattern on the back of combined FII and DII buying.

However, the breakout has not been a convincing one. Volumes (not shown) were not significantly higher to technically confirm the upward breakout. Today's lacklustre trading and formation of a small 'shooting star' candlestick pattern is an indication that bulls were unable to drive home their advantage.

Nifty is trading above its three EMAs in bull territory. A convincing index close above the previous (Dec 19th) top of 10985 is necessary if bulls are to regain control of the chart. 

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways after merging with its signal line. RSI is above its 50% level. Slow stochastic is rising towards its overbought zone. 

Nifty's TTM P/E has moved up to 26.17 - which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone - hinting at some near-term consolidation.

Q3 (Dec '18) results declared so far have been a mixed bag. Upcoming results of Reliance, HUL, ITC can give some impetus to bulls. 

But oil's price is inching up and the Rupee is slipping against the US Dollar. So, the probability of a sustained bull rally appears low.

(Note: Thinking of adding quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for 5 more days only - till Jan 21, 2019. Contact me at mobugobu@yahoo.com for details.)

Sensex, Nifty charts (Jan 11, 2019): poised to breakout from 'diamond' patterns

FIIs were net buyers of equity on Mon. and Wed. (Jan 7 and 9) but net sellers on the other three days during the week. Their total net selling was worth Rs 5.7 Billion. DIIs were net sellers of equity on Mon., but net buyers on the other four days. Their total net buying was worth Rs 11.3 Billion, as per provisional figures.

India's IIP (Index of Industrial Production) dropped to a disappointing 17 months low of 0.5% in Nov '18 from an upwardly-revised 8.4% in Oct '18, due to a high base effect and a contraction in manufacturing growth. The previous low of 0.3% occurred in Jun '17 (a month before GST introduction).

BSE Sensex index chart pattern

The bearish 'rising wedge' pattern (refer last week's post) on the daily bar chart pattern of Sensex has morphed into a 'diamond' pattern, which usually has bearish implications. In other words, the likely breakout from the pattern is downwards.

Since a 'diamond' - a somewhat rare pattern - tends to be a reversal pattern that forms at a market top (refer this post), its formation was ignored earlier. But now it has become visibly obvious that Sensex has been consolidating within a 'diamond' during the past 10 weeks or so. 

Since a 'diamond' can sometimes be a continuation pattern, an upward breakout can't be ruled out. The index has closed above its three EMAs in bull territory with a 0.9% weekly gain. That gives bulls a slight advantage.

Note that a 'diamond'  can be viewed as a 'head and shoulders' reversal pattern with a bent 'neckline'. In this case, the 'head' is actually a bearish 'double top' reversal pattern with two left and two right 'shoulders'. 

A 'diamond' starts out as a bearish 'broadening top', which is followed immediately by a 'symmetrical triangle' pattern. The eventual breakout follows the 'rules' of a breakout from a 'triangle'.

That means, all four possibilities are on the table - a downward breakout, an upward breakout, a 'false' upward/downward breakout, and a sideways move through the right 'apex' of the 'diamond' that negates the pattern. (Hope you are not thoroughly confused!)

Remember that the 'height' of the 'diamond' (~2300 points on Sensex chart above) should be added/subtracted to the breakout point to set the upward/downward target. Wait for the breakout before taking a buy/sell decision.

Daily technical indicators are giving conflicting signals, which is often the case during periods of consolidation. MACD is facing resistance from its gradually sliding signal line in bullish zone. ROC is about to cross below its 10 day MA in neutral zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone.

Of the few Q3 (Dec '18) results announced so far, TCS has met expectations but Infosys has slipped badly. IndusInd and Bandhan Bank have shown downward pressure on margins due to large provisions for IL&FS loans. 

The macroeconomic environment is favouring bears again. Oil's price has started to rise. The Rupee is slipping against the US Dollar. After weak auto sales growth in Dec '18, the shock of the dreadful IIP number in Nov '18 may be the proverbial straw that breaks the back of bulls. 

NSE Nifty index chart pattern

The bearish 'rising wedge' pattern on the weekly bar chart pattern of Nifty has been replaced by a visibly obvious 'diamond' pattern. The 'diamond' is usually a 'reversal' pattern. That means the likely breakout from the pattern is downwards. (Read gory details about the 'diamond' pattern in Sensex post above.)

A 'diamond' has measuring implications. The 'height' of the 'diamond' (~700 points on Nifty chart above) should be added/subtracted to the breakout point to set the upward/downward target. Wait for the breakout before taking a buy/sell decision. 

Weekly technical indicators are giving conflicting signals. MACD has merged with its signal line, and is moving sideways just below its '0' line. ROC has dropped sharply from its overbought zone. RSI has moved above its 50% level. Slow stochastic is rising towards its overbought zone. 

Nifty's TTM P/E is at 26.00, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone, hinting at near-term index correction.

Bottomline? Sensex and Nifty charts have been consolidating within 'diamond' patterns for the past 10 weeks. Breakouts from the patterns appear imminent. Remember that an upward breakout should be accompanied by a volume surge. A downward breakout doesn't require volume support for confirmation. Wait for the breakout before initiating any buy/sell decisions.

(Note: Markets fluctuate, but there are always opportunities if you know where to look. Learn how to choose fundamentally strong stocks. Become a paid subscriber of my Monthly Investment Newsletter. A limited number of new subscriptions are being offered till Jan 21, 2019. Enrollments have started. Contact me for details: mobugobu@yahoo.com.)

Nifty chart: a midweek technical update (Jan 09, 2019)

FIIs were net sellers of equity on Tue. (Jan 8), but net buyers on Mon. & Wed. (Jan 7 & 9). Their total net buying was worth Rs 4.6 Billion. DIIs were net sellers on Mon. but net buyers on Tue. & Wed. Their total net buying was worth Rs 9.9 Billion, as per provisional figures.

According to a World Bank report, global economic growth is projected to soften from a downwardly-revised 3% in 2018 to 2.9% in 2019 amid rising downside risks.

The bull party may be coming to an end. Indian stocks are headed for another tough year as a shrinking global cash pool dims prospects of an improving economy and expected recovery in company earnings - according to BofAML. 

After closing below its three EMAs in bear territory on Thu. Jan 3, the daily bar chart pattern of Nifty formed a 'reversal day' bar (lower low, higher close) on Fri. Jan 4, which triggered four straight days of higher closes.

The index has moved above its 20 day SMA (middle Bollinger Band - marked by dotted green line) and closed above its 50 day and 200 day EMAs in bull territory.

However, today's trading has formed a 'hanging man' candlestick pattern that can bring the four day rally to a close. Those holding long positions may want to book partial profits.

Daily technical indicators are turning bullish. MACD is forming a small 'rounding bottom' pattern below its signal line in bullish zone. RSI and Slow stochastic have moved above their respective 50% levels. 

Note that MACD, RSI and Slow stochastic are showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.

Nifty's TTM P/E has moved up to 26.15 - which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone - hinting at limited index upside.

Small investors should carefully track Q3 (Dec '18) results that are being announced from this week onwards. Think of buying only those stocks that show visible earnings growth.

(Note: Mid-cap and small-cap stocks have been badly beaten down. Thinking of adding some  of them to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers till Jan 21, 2019. Contact me at mobugobu@yahoo.com for details.)

ANNOUNCING re-opening of paid subscriptions to my Monthly Investment Newsletter

I am pleased to announce the re-opening of paid subscriptions to my monthly investment newsletter for a 3 weeks period from Jan 1-21, 2019. A limited number of subscriptions are being offered to blog visitors, blog followers, blog subscribers and twitter followers – on a first-come first-served basis, to enable me to provide personalised attention and guidance to each subscriber.

If you are interested in subscribing, please send an email to: mobugobu@yahoo.com at the earliest for details.

The newsletter has completed 108 issues, with its share of hits and misses. The stock market touched a lifetime high in Aug '18 but has been undergoing a correction since then. Sensex gained 5.9% and Nifty gained 3.15% during 2018.

Mid-cap and small-cap stocks faced the wrath of bears. The 4 months long market correction/consolidation since Sep '18 brought down most selected stocks from their peaks – affecting year-end performance. It is gratifying that subscribers have still kept faith in my stock picking abilities.

Those who have been regularly following my blog posts over the past few years may know what kind of stocks to select, and what type of stocks to avoid. The guiding principle is to choose well-managed, financially prudent companies that generate cash from operations, have low debt, give steady (rather than spectacular) returns and have growth prospects. 

Non-subscribers may be interested to know how the recommended 12 mid-cap and small-cap stocks have fared during the past 12 months. Without revealing the names of the stocks (it won’t be fair to my subscribers to do so), here is a brief summary of performance as on Dec 31, ‘18:

• 4 stocks gained more than 20% from recommended levels, of which 1 gained 31% and 1 gained 78%
• Of the balance 8 stocks, 2 gained between 15-20%, 2 gained between 10-15% and 4 gained between 1.5-6%
• At close of Dec 31 '18, 4 stocks were in the green; 8 stocks were in the red - of which 6 are down less than 9% and should make up the deficit soon, and 2 are down between 23-26%
• All 12 stocks touched higher levels after monthly recommendations

That may not appear all that great, but remember that the market has been correcting/consolidating for the past 4 months. To put it in perspective:  BSE Midcap index was down 13.4% and BSE Smallcap index was down 23.5% during 2018. That means 10 of the 12 recommended stocks have outperformed BSE Midcap and BSE Smallcap indices.

What is important to understand is that none of the recommended stocks were ‘cheap’ – fundamentally strong stocks rarely are - and some had already run up a lot when they were recommended.

The selected stocks are meant to be held for 2-3 years. Over the next 24 months, the laggards are expected to catch up with the leaders. Also, stop-loss levels are suggested every month so that small losses don't turn into big ones. 

If you wish to add fundamentally strong mid-cap and small-cap stocks with growth potential to your portfolio, why wait? Just subscribe to my Monthly Investment newsletter. Send me an email (at mobugobu@yahoo.com) soon – subscriptions will close on Jan 21, 2019.

Nifty chart: a midweek technical update (Jul 18, 2018)

FIIs were net sellers of equity during the first two trading days this week, but net buyers today. Their total net selling was worth Rs 12 Billion. DIIs were net sellers on Mon. Jul 16 but net buyers on the next two days. Their total net buying was worth Rs 7.7 Billion, as per provisional figures.

India's WPI inflation touched 5.8% in Jun '18, compared with 4.4% in May '18 and an upwardly revised 3.6% in Apr '18. It was the highest level touched by WPI since Dec '13 (5.9%). Higher crude oil, cotton, vegetable prices and electricity tariffs were the main culprits.

In a classic case of 'sell on news', HUL stock dropped by more than 100 points after announcing good Q1 (Jun '18) results. Good numbers were also declared by Federal Bank, Bandhan Bank, ICICI Lombard, Zee Entertainment. Jindal Stainless, Cyient, Hindustan Media Ventures, GM Breweries came out with disappointing numbers.

In last week's technical update on the daily bar chart pattern of Nifty, a few technical reasons were cited to warn bulls. The index subsequently crossed above 11050 on intra-day basis three occasions, but failed to close above 11025.

The 'resistance zone' between 10950 and 11120 is being used by bears to make a last stand. The index is trading well above its three rising EMAs and the (purple) up trend line in a bull market. So, expect the index to cross above the 'resistance zone' to a new lifetime high sooner than later.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways above its signal line. RSI is moving sideways above its 50% level. Slow stochastic is about to fall from its overbought zone. 

Nifty's TTM P/E has moved up to 27.28 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some index consolidation or correction.

Oil's price has moderated a bit. But rising inflation may force RBI to raise interest rates during its Aug '18 monetary policy meeting. Manufacturing activity is not showing any significant uptick. The macroeconomic environment is not conducive to growth.

Investors should be cautiously optimistic and remain stock and sector specific in their buying, because the rally from the Mar '18 low has not been broad-based. 

(Note: Thinking of buying quality mid-cap and small-cap stocks but not sure which ones to pick? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for three more days only - till Jul 21, 2018. Contact me at mobugobu@yahoo.com for details.)

Sensex, Nifty charts (Jul 13, 2018): bulls overcome bear resistance

FIIs were net sellers of equity on four out of five trading days last week. Their total net selling was worth Rs 18 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth Rs 22.9 Billion, as per provisional figures.

In twin setbacks for India's economy, CPI inflation increased to 5% in Jun '18 from 4.87% in May '18 while IIP moderated to a 7 months low of 3.2% in May '18 from 4.7% in Apr '18.

India's trade deficit widened to a 5 year high of US $16.6 Billion in Jun '18 from US $14.6 Billion in May '18 due to a surge in oil prices and a weaker Rupee against the US Dollar. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows that bulls have successfully overcome the resistance of bears - thanks to sustained buying by DIIs. The down trend line that dominated the chart for more than 5 months has been comprehensively breached.

The index touched a new lifetime high of 36740 on Fri. Jul 13, but closed a shade lower to form a small 'reversal day' bar that can lead to a pullback towards the breached down trend line. That may be an opportunity for entry for those who missed buying on the break out.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone; RSI has entered its overbought zone. Both are showing negative divergences by failing to touch new highs with the index. ROC and Slow stochastic have started to move down inside their respective overbought zones.

Sensex is trading well above its three rising EMAs in a bull market. However, just a handful of index stocks have been mainly responsible for the rally from the Mar '18 low. The broader market - particularly mid-cap and small-cap stocks - have not participated in the rally so far.

That can change if Q1 (Jun '18) results of India Inc. start to show earnings improvement. Stock picking skills will get tested at a market top. It is better to err on the side of caution. Use the SIP approach. Avoid impulsive buying in bulk. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty finally breached the down trend line that had dominated the chart for the previous 23 weeks. Note that the surge in volumes that technically validates an upward breakout was missing. A pullback towards the trend line is a possibility.

The index is trading well above its two rising weekly EMAs in a bull market. Any pullback towards the trend line can be a buying opportunity.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC is about to cross above its 10 week MA and enter its overbought zone. RSI and Slow stochastic are moving sideways inside their respective overbought zones, and showing negative divergences by failing to rise higher with the index.

Nifty's TTM P/E has moved up to 27.38 - which is well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) has dropped towards its overbought zone, hinting at some correction or consolidation.

Bottomline? Bulls have overcome four straight weeks of strong bear resistance by triggering a break out above down trend lines on Sensex and Nifty charts. Some  consolidation or correction will improve the technical 'health' of the charts. No need to feel euphoric yet, as only a few large-cap stocks have been responsible for the rallies from the lows of Mar '18.

(Note: There are always opportunities in the stock market if you know where to look. Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment Newsletter today. A limited number of new subscriptions are being offered till Jul. 21, 2018. Contact me for details: mobugobu@yahoo.com.) 

Nifty chart: a midweek technical update (Jul 11, 2018)

FIIs were net sellers of equity during the first two trading days this week, but net buyers today. Their total net buying was worth Rs 0.5 Billion. DIIs were net buyers on all three days. Their total net buying was worth Rs 10.5 Billion, as per provisional figures.

The GST Council may consider reduction in tax rates on several goods and services with low revenue implications as part of the tax rationalisation exercise in its next meeting on July 21.

Q1 (Jun '18) results season of India Inc. has started with a bang. TCS reported better than expected numbers. IndusInd Bank turned out another solid quarter. Prakash Ind. announced spectacular triple-digit growth in net profit.  

After being thwarted by bears a few times, the daily bar chart pattern of Nifty finally broke out above the (purple) down trend line that had dominated the chart for more than 5 months.

All three EMAs are rising, and the index is trading above them in a bull market. Time for bulls to start celebrating? Yes, but with a less vigorous approach. Why?

There are a few technical reasons: 
1) volumes (not shown) accompanying the breakout on Mon. Jun 9 were moderate - not sufficiently strong to technically validate the breakout; 2) the index has moved a bit far above its 20 day EMA, which is a sign of an overbought condition; 3) negative divergences visible on MACD and RSI, which touched lower tops than their May '18 tops, while the index has moved higher; 4) today's trading has formed a 'doji' candlestick that may be part of a bearish 'evening star' pattern (which will get confirmed only if tomorrow's trading forms a bear candle).

As often happens after a breakout, a pullback towards the down trend line can be expected. Can the pullback cause the index to drop below the down trend line? The possibility can't be ruled out at this stage.

Daily technical indicators are bullish, and looking overbought. MACD has crossed above its signal line, and rising towards overbought zone. RSI is also rising towards its overbought zone, but its upward momentum has reduced. Slow stochastic is well inside its overbought zone, and can trigger a pullback towards the down trend line.

Nifty's TTM P/E has moved up to 27.2 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, and may limit near-term index up side.

Trump has announced more tariff's on Chinese imports. FIIs are fleeing Asian emerging markets. Oil's price remains high, and can go higher. Rupee is tumbling against the US Dollar, and RBI is forced to sell Dollars to prevent a Rupee free fall. Inflation is rising, and interest rates will follow. Lots of IPOs are in the pipeline. 

The macro environment is not conducive for a sustained bull rally. Stay invested, but don't feel euphoric about this week's Nifty breakout.

(Note: Planning to add quality mid-cap and small-cap stocks to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers till Jul 21, 2018. Contact me at mobugobu@yahoo.com for details.)

Sensex, Nifty charts (Jul 06, 2018): bears stand firm against bull onslaught

FIIs were net sellers of equity during all five trading days last week. Their total net selling was worth Rs 36.6 Billion. DIIs were net sellers on Thu. Jul 5 but net buyers on the other four days. Their total net buying was worth Rs 24.4 Billion, as per provisional figures.

Indian engineering exports have grown by nearly 20% during Apr-May '18 even as the US-China tariff war has spread to key trading markets in Europe, Canada and Mexico, as per an EEPC statement.

Agri experts and activists from Maharashtra have criticised the government for its 'false and misleading' claim that the MSP of kharif crops have been hiked by 50%.

Yes Bank has forecast the recently announced increase in minimum support prices (MSP) for kharif (summer-sown) crops will add 35 bps (0.35%) incrementally to headline inflation during FY 2018-19.

BSE Sensex index chart pattern

The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "The rising 200 day EMA shows that the long-term chart structure remains bullish. The down trend line, which has dominated the chart for the past 5 months, shows that bears are not ready to give up their near-term advantage."

Other than the fact that Sensex gained about 0.7% on a weekly closing basis - erasing most of the previous week's loss - nothing much has changed on the chart technically.

Bulls made another attempt to make the index breach the down trend line but failed as bears stood their ground. The index closed above its three daily EMAs in bull territory.

Daily technical indicators are looking neutral to bullish. MACD is facing resistance from its sliding signal line in bullish zone. ROC is falling towards its 10 day MA in neutral zone. RSI is in neutral zone, but not showing any upward momentum. Slow stochastic has risen to the edge of its overbought zone.

The index appears to be waiting for some trigger to make a decisive move. May be Q1 (Jun '18) results will show some earnings growth from India Inc. Auto and FMCG earnings should show improvement. 

The tariff war unleashed by Trump, high oil prices, a falling Rupee against the US Dollar, continuous FII selling are not making market sentiment conducive for bulls despite good inflows into domestic mutual funds.

Stay invested, and wait for opportunities to present themselves. The forthcoming IPO from HDFC AMC should be a good long-term investment opportunity. 

NSE Nifty index chart pattern

For the 4th straight week, the bar chart pattern of Nifty faced strong resistance from the down trend line. For the 2nd week in a row, the index dropped below the 33 points downward 'gap' (formed on Feb 5) but received support from its rising 20 day EMA.

Nifty closed above its two rising weekly EMAs in a bull market. However, for the past 23 weeks it has closed below the down trend line.

Weekly technical indicators are in bullish zones, but not showing any upward momentum. MACD is moving sideways just above its signal line. RSI and Slow stochastic are sliding down inside their respective overbought zones. ROC has crossed below its 10 week MA and falling towards neutral zone. 

Nifty's TTM P/E has moved up to 26.62 - which is well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some more consolidation around current levels.

Bottomline? Bears are strongly defending down trend lines on Sensex and Nifty charts. For the 4th straight week, bulls have failed to budge them. Some more consolidation or correction is likely. Wait for clear trends to emerge. Long term trends continue to remain up. 

(Note: Don’t worry too much about index fluctuations! Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment Newsletter today. A limited number of new subscriptions are being offered till Jul. 21, 2018. Contact me for details: mobugobu@yahoo.com.) 

Nifty chart: a midweek technical update (Jul 04, 2018)

FIIs were net sellers of equity during the first three trading days this week. Their total net selling was worth a huge Rs 25.3 Billion. DIIs were net buyers on all three days. Their total net buying was worth Rs 12.6 Billion, as per provisional figures.

Indian auto sales showed double-digit YoY growth in Jun '18 - albeit on lower base in Jun '17 due to BS IV and GST implementation uncertainties. Maruti (36%), M&M (25%), Tata Motors (63%), Bajaj Auto (65%), Ashok Leyland (28%), Honda Cars (37%) were the leaders of the pack.

Nikkei India's Manufacturing PMI improved to 53.1 in Jun '18 from 51.2 in May '18. The Services PMI climbed to 52.6 in Jun '18 from 49.6 in May '18. (The 50 mark separates growth from contraction.) The Composite (Mfg. + Services) PMI rose to 53.3 in Jun '18 from 50.4 in May '18. 

The following comments were made in last week's update on the daily bar chart pattern of Nifty: "Bears have forced open the door for an index fall below the 50 day EMA, and a test of support from the 200 day EMA. Will Nifty fall that far? May be not right away. Expect support from the zone between 10400 and 10550.."

Just as expected, Nifty dropped below its 50 day EMA (on Thu. Jun 28) and received support from the zone between 10400 and 10550. The subsequent pullback rally is facing resistance from the (green) up trend line.

The index has closed above its three EMAs in a bull market. A convincing move above the (purple) down trend line will put bears on the defensive. Note that on a few past occasions when Nifty moved above the 'gap' (formed on Feb 5), it faced resistance from the down trend line and fell below the 'gap'. 

Will this time be different, or will the pattern repeat? Volumes (not shown) on recent down days have remained strong. The number of declining stocks have been higher or equal to the number of advancing stocks during the pullback rally. Both are bearish signs.  

Daily technical indicators are looking neutral to bullish, and are showing slight upward momentum. MACD is below its signal line in neutral zone. RSI is trying to move above its 50% level. Slow stochastic received support from the edge of its oversold zone, and has moved up to neutral zone.

Nifty's TTM P/E has moved up to 26.02 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at near-term index consolidation.

Oil's price is not showing any signs of moderating in the near future. Coupled with a weak Rupee against the US Dollar, it is creating an environment for higher inflation and higher interest rates. A slew of IPOs are in the pipeline - including a Rs 30 Billion offering from HDFC's AMC. Liquidity may get squeezed out of the secondary market.

Investors should be cautiously optimistic, and remain invested. Avoid impulsive buying or selling till the consolidation/correction resolves itself into a clear trend.

[Is this a good time to buy mid-cap and small-cap stocks, or should you wait for a deeper correction? Answers to such questions can be found in my Monthly Investment Newsletter. Paid subscriptions are being offered only for a limited period. Send an email to mobugobu@yahoo.com for details. Subscriptions will remain open till July 21, 2018.]