Sensex, Nifty charts (Apr 30, 2020): breakout above rising wedge patterns

In a holiday-shortened week, FIIs were net sellers of equity on Mon. and Tue. (Apr 27 and 28) but net buyers on the next two days. Their total net buying was worth Rs 16.52 Billion. DIIs were net buyers of equity on all four trading days, worth Rs 28.96 Billion, as per provisional figures.

Interestingly, during Apr '20, FIIs and DIIs were both net sellers of equity - worth Rs 52.1 Billion and Rs 1.2 Billion respectively. Wonder who bought during the sharp month-long counter-trend rally!

India's core sector output contracted 6.5% in Mar '20 - its worst performance in nearly 15 years - against growth of 7.2% in Feb '20. During FY 2019-20, infrastructure industries grew just 0.6% against 4.4% during FY 2018-19.

Top automobile makers like Maruti, M&M, Hyundai, Toyota, MG, Royal Enfield reported nil domestic sales during Apr '20, as their operations remained suspended due to the lockdown since Mar 25th to prevent the spread of the corona virus.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex broke out above the 'rising wedge' pattern with an upward 'gap' on Apr 30. The bearish pattern has been negated, thanks to combined FII and DII buying. 

The index closed above its 50 day EMA after more than a month, and gained almost 2400 points (7.6%) on a weekly closing basis. Is it time for bulls to celebrate? Not quite. Note that the 200 day EMA is still falling, and the index is trading well below it. That is a sign of a bear market.

Bear market rallies tend to be fast and furious - and the rally during April has certainly been sharp. Many small investors with no experience of a bear market may have jumped in to 'buy the dip'. They will save themselves a lot of heartburn by maintaining tight stop-losses, or by booking profit.

Daily technical indicators are giving mixed signals. MACD is rising above its signal line and reached its neutral zone. RSI has crossed above its 50% level to enter bullish zone. Slow stochastic has re-entered its overbought zone, and can trigger a pullback inside the 'wedge'. 

By extending the virus lockdown by a further two weeks through an utterly confusing order, the government has kicked the problem down the road with no clear plan of what to do next - leaving state governments and individuals to fend for themselves.

There is every possibility that FIIs will unleash a fresh bout of selling in May '20. They have been net sellers of equity for four straight months, though the volume of selling in Apr '20 was much lower than in Mar '20. Staying on the sidelines may be a good idea till the lockdown finally ends.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty broke out above the 'rising wedge' and gained more than 700 points (7.7%) on a weekly closing basis, but closed below its 200 week EMA for the 8th straight week.

The 20 week EMA has crossed below the 200 week EMA for the first time in 9 years. All three weekly EMAs continue to fall, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is still awaited.

The sharp counter-trend rally on Nifty chart from the Mar '20 low of 7511 gained momentum as FIIs and DIIs were in buying mode during the week. An unexpected upward breakout has negated the bearish 'rising wedge' pattern.

Weekly technical indicators are giving bullish signals. MACD is below its signal line inside its oversold zone, but has formed a small bullish 'rounding bottom' pattern. RSI is rising in bearish zone. Slow stochastic has risen sharply to enter its overbought zone, and can trigger a pullback. 

Nifty's TTM P/E has moved up to 22.35 - its highest level during Apr '20 - which is above its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is in its neutral zone, hinting at some near-term index consolidation or a correction.

Bottomline? Sensex and Nifty charts are trading below their respective 200 day and 200 week EMAs in bear markets. Extension of the corona virus lockdown will most likely push an already weak economy into a recession. Small investors can continue with their SIPs, but should sit on cash till a clear path to normalcy is visible. 

Sensex, Nifty charts (Oct 25, 2019): bears refusing to release their grip on the market

In a holiday-shortened trading week, both FIIs and DIIs were net sellers of equity, putting paid to bullish hopes of new index highs by Diwali. FIIs were net sellers of equity on all four trading days. Their total net selling was worth Rs 12.8 Billion. DIIs were net sellers of equity Tue. through Thu. (Oct 22-24), but net buyers on Fri. Their total net selling was worth Rs 14.2 Billion, as per provisional figures.

Reforms in land management, enforcing contracts and providing adequate resources to district level courts could be the next big measures through which India can improve its 'Ease of Doing Business' rankings, as per World Bank president David Malpass.

A former European trade commissioner said India needs to remove trade barriers and improve road and port infrastructure if it wants to benefit from movement of supply chains from China. Corporate tax cut was a "smart move" but "insufficient" to attract investors.

BSE Sensex index chart pattern

The following comment had appeared in last week's post on the daily bar chart pattern of Sensex: "The breakout hasn't been a technically convincing one yet, because accompanying volumes (not shown) were not significantly higher during the trend line breach."

As FIIs and DIIs turned net sellers during the week, the index consolidated with a downward bias near the down trend line and closed just below the trend line by Fri. Oct 25.

Daily technical indicators are in bullish zones, but only RSI is showing upward momentum by rising towards its overbought zone. MACD is moving sideways above its rising signal line. ROC is oscillating at the edge of its overbought zone. Slow stochastic is poised to fall from its overbought zone. More near-term index consolidation or correction is likely.

All three EMAs are rising, and the index is trading above them in a bull market. However, bears have yet to release their grip on the market. So, be very selective if you opt to follow a 'buy the dip' strategy.

Partial setbacks for the NDA in the recently concluded state elections in Maharashtra and Haryana - where they failed to win overwhelming majorities they had expected - have turned investors a little cautious. The silver lining is that the government may be forced to pay greater attention to the faltering economy.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty had breached the (blue) down trend line on the back of FII buying a week ago. As FIIs and DIIs turned sellers, the index pulled back to the trend line - dashing any possibility of a new index high by Diwali.

Weekly technical indicators are looking neutral to bullish. MACD and RSI are at their respective neutral zones. ROC and Slow stochastic have risen to the edges of their respective overbought zones. Some near-term index consolidation or correction is likely.

Nifty's TTM P/E has slipped down to 26.70 - which remains well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) has bounced up sharply from overbought zone. Some near-term index consolidation is possible. 

Bottomline? Sensex and Nifty charts are consolidating after breaching 4 months old down trend lines. A cut in corporate taxes boosted bullish sentiments. Tepid Q2 results have poured cold water on buying enthusiasm. Stay invested. Avoid any bulk buying in 'cheap' stocks.

Nifty chart: a midweek technical update (Jul 17, 2019)

FIIs were net sellers of equity during the first three trading days of the week. Their total net selling was worth Rs 6.8 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 14.4 Billion, as per provisional figures.

India's WPI-based inflation cooled to a 23 months low of 2.02% in Jun '19 from 2.45% in May '19 and 5.68% in Jun '18. Softening WPI has reinforced expectations of a further interest rate cut by RBI.

India's merchandise exports fell 9.71% YoY to US $25.01 Billion in Jun '19. Imports declined 9.06% YoY to $40.29 Billion - a 4 months low. Trade deficit narrowed 8% for the month to $15.28 Billion. Falling imports reflect weakness in demand and activity.

The following comment appeared in last week's technical update on the daily bar chart pattern of Nifty: "Slow stochastic has fallen sharply to enter its oversold zone, and can trigger a pullback towards the 50 day EMA." 

The index corrected and almost completely filled the 'GAP' (formed on May 20) as the stock market was disappointed with the budget provisions. The expected index pullback faced resistance from the 20 day EMA and closed just below the 50 day EMA today.

So far so good. What next? After touching a lifetime high of 12103 on Jun 3, Nifty has formed a bearish pattern of 'lower tops, lower bottoms'. If the pattern continues to play out, further upside ought to be limited. The next leg of the down move should follow.

Daily technical indicators are turning bullish. MACD is forming a 'rounding bottom' pattern below its falling signal line in bearish zone. RSI has moved up to its 50% level. Slow stochastic is rising after emerging from its oversold zone. Some near-term upside is likely.  

Nifty's TTM P/E has moved up to 28.58, which is well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone - hinting at limited near-term index upside.

Since Mar '19, Nifty has been trading above its rising 200 day EMA in a bull market. Which means 'buy the dips' should be the obvious strategy. However, there is nervousness in the market due to a slowing economy and a divergence in performance between the broader market and a few large-cap stocks.

Watch Q1 (Jun '19) results carefully. Be very selective and patient about what you buy. Near a market top, it is better to be cautious than adventurous.

S&P 500 and FTSE 100 charts (Jul 12, 2019): bears try their best to stop charging bulls

S&P 500 index chart pattern

An expected pullback towards the support level of 2954 on the daily bar chart pattern of S&P 500 touched an intra-day low of 2963 on Tue. Jun 9. Bulls decided to 'buy the dip'. 

The index formed a 'reversal day' bar (lower low, higher close), which triggered a quick rally past the 3000 level to a new high of 3014 on Fri. Jul 12. The index gained 23 points (0.8%) on a weekly closing basis.

Daily technical indicators are looking overbought. MACD is rising above its signal line inside its overbought zone. RSI has entered its overbought zone. Slow stochastic is climbing inside its overbought zone, but showing negative divergence by failing to touch a new high with the index. 

Some consolidation or correction is possible. All three EMAs are rising, and the index is trading well above them in a bull market. 

On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are  looking bullish and overbought, and 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 consolidated sideways with a downward bias during the week. After closing above the support level of 7529 during the first three days, the index slipped below 7529 on Thu. Jun 11.

The 20 day EMA provided good support. The index managed to close above the 7500 level and its three EMAs in bull territory. FTSE lost 47 points (0.6%) on a weekly closing basis.

Daily technical indicators are in bullish zones but looking bearish. MACD has crossed below its signal line. RSI and Stochastic are falling towards their respective 50% levels. Some more consolidation or correction is likely.

On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the sixth straight week. Weekly technical indicators are in bullish zones. MACD has crossed above its signal line. RSI is slowing slight downward momentum above its 50% level. Stochastic has slipped down from its overbought zone. 

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 (Apr 10, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 29.7 Billion. DIIs were net sellers of equity on Mon. and Tue. (Apr 8 and 9) but net buyers today. Their total net selling was worth Rs 8.5 Billion, as per provisional figures.

Fall in auto sales, shortfall in direct tax collection and household savings, 7% contraction in FDI during Apr-Dec '18 are all pointing to a slow down in the Indian economy. 

According to the Federation of Indian Export Organisations (FIEO), rising protectionism, fluctuating commodity prices, inadequate availability of liquidity and slowdown in global trade will be major challenges faced by exporters.

Note the following comment from last week's technical update on the daily bar chart pattern of Nifty: "The last ten trading sessions have formed a bearish 'rising wedge' pattern, from which a downward breakout can be expected."

As expected, a breakout below the 'wedge' occurred on Thu. Apr 4. But bulls adopted a 'buy the dips' strategy that has so far prevented a correction towards the 46 points 'gap' formed on Mar 12.

Daily technical indicators are in bullish zones after correcting overbought conditions. MACD has crossed below its signal line. RSI and Slow stochastic are falling towards their respective 50% levels. Some more correction or consolidation is likely, which will improve the technical 'health' of the chart. 

Nifty's TTM P/E has fallen a little to 28.91, but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has risen to the edge of its oversold zone - hinting at some more consolidation or correction.

Annual results season and general elections have coincided. An index run-up to a new high before two major events has been followed by some profit booking. Nothing unusual with that.

The stock market has already 'discounted' a second term for the NDA government. If there is a hung parliament or an unlikely opposition victory, a sell-off can be expected. That will be a good long-term buying opportunity - if it occurs. 

Partial profit booking may be a good idea for those who were able to take advantage of the pre-election rally. Don't worry if you missed the rally. Stay invested and stick to your SIPs. The market keeps providing more opportunities to those who remain invested for the long-term.

S&P 500 and FTSE 100 charts (Jun 01, 2018): bulls yet to come out of the woods

S&P 500 index chart pattern

The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "Slow stochastic has formed a 'double top' reversal pattern inside its overbought zone. Some more consolidation or correction is likely."

After a long weekend, the index dropped to an intra-day low of 2677 on Tue. May 29, and closed below its 20 day and 50 day EMAs at 2690. Bulls used the opportunity to 'buy the dip'. The index rose above its 20 day and 50 day EMAs and closed with a weekly gain of about 0.5%. 

Daily technical indicators are in bullish zones. MACD has merged with its signal line, and is moving sideways. RSI and Slow stochastic briefly dropped below their respective 50% levels before recovering.

Bulls may make another attempt to fill 'GAP 2' - either partly or completely. Their previous two attempts had failed. May be it will be 'third time lucky'? Even if it is, the upper edge of 'GAP 2' can provide tougher resistance.

The two down-days last week (Tue. May 29 and Thu. May 31) had the highest transaction volumes. That is probably a sign of 'distribution' from stronger to weaker hands. 

On longer term weekly chart (not shown), the index closed above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing very little upward momentum.

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 corrected below its 20 day EMA to an intra-day low of 7610 on Tue. May 29. It bounced up the next day, and closed above its 20 day EMA.

The index consolidated above its 20 day EMA in bull territory till the end of the week, but lost about 0.4% on a weekly closing basis.

Daily technical indicators have corrected overbought conditions. MACD and RSI are showing downward momentum in bullish zones. Slow stochastic is trying to recover after falling below its 50% level.

The index may attempt to cross above its Jan '18 top of 7793 after some more consolidation in the zone between 7610 and 7793. (At the time of writing this post, FTSE is trading about 40 points higher.)

On longer term weekly chart (not shown), the index closed well above its  three weekly EMAs in a long-term bull market, and formed a 'hammer' candlestick that has bullish implications. Weekly MACD is rising inside its overbought zone. RSI is rising above its 50% level. Slow stochastic is correcting inside its overbought zone.

Nifty chart: a midweek technical update (May 23, 2018)

FIIs were net sellers of equity during the first three trading days this week. Their total net selling was worth Rs 24.6 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 34.8 Billion, as per provisional figures.

The fear of losing control over their companies has led to defaulting promoters of 2100 companies settle their dues of around Rs 830 Billion before action was initiated under the newly-enacted Insolvency & Bankruptcy Code (IBC).

During FY 2017-18, India's net direct tax collections have crossed Rs 10 Trillion mark, which is 18% higher than the collections in FY 2016-17.

The following was the concluding remark in last week's technical update on the daily bar chart pattern of Nifty: "A fall below 10602 can lead to a deeper correction."

The index dropped below its 20 day EMA, and closed at 10596 on Fri. May 18. That encouraged bears to continue their rampage.

The index fell below its 50 day EMA on Mon. May 21, only to pullback to its medium-term moving average the next day. The index dropped further and closed below 10450 today.

A test of support from - and possible breach of - the 200 day EMA is on the cards. A fall below the Mar 29 low of 9952 will form a bearish pattern of 'lower tops, lower bottoms' and take the index lower towards 9700.

Daily technical indicators are looking bearish and showing downward momentum. MACD is falling below its signal line in bullish zone. RSI is falling below its 50% level in bearish zone. 

Slow stochastic has dropped well inside its oversold zone, but is showing negative divergence by touching a lower bottom than its Mar 29 low. Some more correction is likely.

Nifty's TTM P/E has slipped down to 25.86 - which is still much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone, and can limit near-term index down side. 

Small investors should avoid the impulse to rush in to 'buy the dip'. Let the correction play out. Patience can get rewarded with better entry points.

Sensex, Nifty charts (May 18, 2018): bears on the warpath

FIIs were net sellers of equity on four of the five trading days. Their total net selling during the week was worth Rs 15 Billion. DIIs were net buyers of equity on all five trading days. Their net buying was worth Rs 20.3 Billion, as per provisional figures.

Sensex and Nifty both lost 1.9% on a weekly closing basis. What can be more worrisome for bulls is that both indices closed below the downward 'gaps' formed on Feb 5.

India's import bill could bloat by $25-50 billion in the current financial year due to spike in crude oil prices, but the government sees no reason for panic. However, a report by Goldman Sachs says that India's Current Account Deficit (CAD) may increase to 2.4% of GDP in FY 2018-19.

BSE Sensex index chart pattern

Negative divergences visible last week on overbought technical indicators on the daily bar chart pattern of Sensex had hinted at a likely corrective move.

A hung Karnataka assembly provided bears with just the trigger they were looking for. The index touched an intra-day high of 35994 on Tue. May 15 - its highest level in more than 3 months - as initial results showed a BJP majority.

However, as the day progressed and more results came in, it became clear that BJP will fall short of a simple majority. Profit booking ensued. The index dropped to close near its opening level - forming a 'shooting star' candlestick pattern that often marks an intermediate top. 

Bears went on the warpath. The index corrected for three straight sessions, falling below its 20 day EMA and closing just below the downward 'gap' formed on Feb 5.

The index touched an intra-day low of 34822 on Fri. May 18, falling below its previous (May 4) low of 34848 which can lead to further downside. However, by closing exactly at 34848, the index has kept open the possibility of a technical bounce.

Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in bullish zone. ROC has dropped below its 10 day MA to its neutral zone. RSI has also dropped to its neutral zone. Slow stochastic is falling below its 50% level.

Resignation of Karnataka's BJP CM before the floor test on Sat. May 19 - as he failed to engineer defections from the opposition Congress and JD(S) - will give bears added incentive to sell.

Small investors need not be in a rush to 'buy the dip'. As mentioned in several previous posts, filling of the Feb 5 downward 'gap' was expected to be followed by a resumption of the corrective down move from the Jan 29 top. 

The 'support-resistance zone' between 32500 and 33800 can come back into play. Note that the rising 200 day EMA is in the middle of the 'support-resistance zone' and is likely to provide strong support should the index fall that far.  

NSE Nifty index chart pattern

Small investors were advised caution in last week's post on the weekly bar chart pattern of Nifty because of fundamental and technical headwinds. The index touched a 3 months high of 10929 but closed at a 3 weeks low of 10596 - forming a 'reversal' bar (higher high, lower close) with good volume support that can lead to further correction.

The previous 3 weeks' trading has formed a bearish 'broadening top' pattern (higher high, lower low) from which a downward breakout is likely.

Weekly technical indicators are in bullish zones, but their upward momentum have stalled. The index is trading above its two rising weekly EMAs - so the bullish structure of the chart is intact.

Nifty's TTM P/E has decreased to 26.27 - which is still much above its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply to enter its oversold zone, and can limit near-term index downside.

Bottomline? Counter-trend rallies on Sensex and Nifty appear to have ended. Some more correction or consolidation will help improve the technical 'health' of both charts. Don't rush to 'buy the dip'. Better entry points may become available with a bit of patience.

Nifty chart: a midweek technical update (May 02, 2018)

For the month of April '18, FIIs were net sellers of equity worth Rs 99.6 Billion. DIIs were net buyers of equity worth Rs 85.1 Billion, as per provisional figures. Nifty gained 6.2% on a monthly closing basis.

Many car makers had double-digit YoY growth in sales during April '18. Tata Motors (34%), M&M (22%), Maruti Suzuki (14%) led from the front. Hyundai (4.4%), Honda Cars (-35%), Ford (-40%) were the laggards. 

Nikkei India's Manufacturing PMI rose to 51.6 in Apr '18 against 51.0 in Mar '18 (a number >50 indicates growth). However, export orders slipped to a 5-month low.

On Mon. Apr 30, the counter-trend rally on the daily bar chart pattern of Nifty had completely filled the 33 points downward 'gap' formed on Feb 5. After a day's holiday, the index rose further to touch an intra-day high of 10785 today. 

However, it corrected and dropped below the 'gap' to an intra-day low of 10690 before recovering to close at 10718 - right in the middle of the 'gap' - and formed a 'reversal day' bar (higher high, lower close).

Note the following comment from last week's update: "As per 'gap theory': even if the 'gap' is filled partly or completely, the down move should resume thereafter." 

Will the 'reversal day' bar, which often signals an intermediate top, trigger the expected resumption of the down move? The next two days' trading should give us a clear hint.

All three EMAs are rising, and the index is trading above them in a bull market. The (purple) up trend line from the Mar 23 low is intact. Daily technical indicators are in bullish zones. Bulls have been successful in following a 'buy the dip' strategy.

There are a couple of warning signals that have been flashing red for a while. The up trend line - typical of a counter-trend rally - is a bit too steep and unlikely to sustain much longer. Daily technical indicators are looking overbought. RSI faced resistance from the edge of its overbought zone, and is turning down.

Nifty's TTM P/E has moved up to 26.60 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is treading water in neutral zone. Some consolidation or correction is possible, but a deep correction appears unlikely.

Macro signals aren't conducive to a sustained rally either. Rising oil prices, falling exports and a depreciating Rupee has led to a widening of India's trade deficit. High bond yields are another concern.

Outcome of Karnataka state elections may also have a negative impact on market sentiment if BJP fails to form a government. 

Regular flow of liquidity into domestic mutual funds has given a vote of confidence to the market, and may continue to do so in the near term. If India Inc's Q4 (Mar '18) earnings do not show expected growth - results have been mixed so far - the market will start behaving like a weighing machine. 

Are you a bull or a bear? Why not both?

Most small investors thrive in bull markets. They feel comfortable by buying low and selling high. The adventurous buy high and sell higher. The sophisticated buy more on small corrections to support levels. They make the trend their friend.

All their best laid plans go haywire when bears attack. Panic sets in as portfolio values go crashing. Stock prices fall below 'buy' prices. Some book losses and get out, promising never to come back again.

Others make a bad problem worse. They start 'averaging down' - buying more at lower prices. When the stock shows no sign of recovering, they lose heart and book huge losses.

What happened to making the trend a friend? The analytical side of the brain gets scrambled when money is rapidly going down the drain. The only thought is 'take the money and run'.

The smart ones - they become that way after losing money in bear markets - know that you can be a bull AND a bear depending on the trend. 'Buy the dips' when the trend is up. 'Sell on rise' when the trend is down.

The 'buy the dips' is the easier strategy to follow. No wonder small investors prefer it. You keep buying as a stock's price moves up. No selling is involved - till you decide to book profits when upward target is met.

'Sell on rise' is harder, and requires practice to succeed. For every sell, you need to buy back at a lower price. And then repeat the process - till the correction ends. Deciding when to buy back requires skill.

Studying long-term technical chart patterns to identify support and resistance levels can prove invaluable for identifying entry and exit points. 

Sometimes stocks get into consolidation phases that can last months. What to do then? If the consolidation range is reasonably wide - say, 40-50 points instead of 10-15 points - draw a line through the middle of the range. 'Buy the dips' below the mid-point, 'sell on rise' above the mid-point.

For longer term investors, it is better to be a crocodile or a python (both have a lot of patience) instead of a bull or a bear during consolidation phases. Just wait patiently for a price breakout in either direction.

Gold and Silver charts: facing resistances after pullback rallies

Gold chart pattern

The daily bar chart pattern of Gold corrected below its 20 day and 50 day EMAs, but received good support from the 'support/resistance' zone between 1300 & 1310.

The overbought Slow stochastic indicator triggered a sharp pullback rally that touched a slightly lower top of 1364.40 on Fri. Feb 16. Formation of a long-legged doji candlestick pattern indicates hesitation among bulls and bears.

Gold's price appears to have formed a 'double top' reversal pattern inside the resistance zone between 1360 & 1380. The first technical confirmation of a 'double top' - lower volumes during formation of the second top - has been received.

The second technical confirmation - a fall below the 'valley' low of 1309 touched on Feb 8 - is awaited. (At the time of writing this post, gold's price has slipped down to 1340.)

Daily technical indicators are in bullish zones. MACD has crossed above its signal line. Slow stochastic has risen well inside its overbought zone. RSI is showing negative divergence by sliding down as gold's price rose higher on Feb 16.

Another fall towards the 'support/resistance' zone between 1300 & 1310 is possible. Gold's price is trading above its three EMAs in a bull market. Bulls are likely to 'buy the dip' again.

On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory, but may have formed a 'double top' reversal pattern.  Weekly technical indicators are in bullish zones, but not showing much upward momentum. Slow stochastic has dropped from its overbought zone. 

Silver chart pattern

The daily bar chart pattern of Silver corrected to an intra-day low of 16.13 on Feb 9. Overbought Slow stochastic and a small 'double bottom' reversal pattern on RSI led to a pullback rally.

The rally failed to overcome strong resistance from the 200 day EMA. Silver's price closed below its three EMAs in bear territory.

Daily technical indicators are looking neutral to bearish. MACD has moved up towards its signal line in bearish zone but has not been able to cross above it. RSI and Slow stochastic are facing resistances from their respective 50% levels.

Expect bears to 'sell on rise'. (At the time of writing this post, silver's price has slipped down to 16.44.)

On longer term weekly chart (not shown), silver’s price closed below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones. 

Sensex, Nifty charts (Jan 25, 2018): FIIs go on a buying spree

Volumes were expected to be low due to F&O expiry on Jan 25 and Republic Day holiday on Jan 26. That didn't deter FIIs from buying. Their net buying in equities was worth Rs 45.1 Billion during the week.

DIIs were net sellers of equity worth Rs 14.5 Billion, as per provisional figures. Sensex (36268) and Nifty (11110) touched new highs during the week before retreating a bit due to profit booking.

GST collection reversed trend by rising to Rs 867 Billion in Dec '17. Collections had slipped to Rs 808 Billion in Nov '17 from more than Rs 830 Billion in Oct '17. Measures to raise compliance are beginning to show results, as per government officials.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched new intra-day and closing highs on Wed. Jan 24, but formed a 'doji' candlestick pattern (which indicates indecision among bulls and bears).

There was profit booking on Thu. Jan 25 before the long weekend. Bulls had built up a good head of steam after breaking out above a 'rectangle' consolidation pattern on Jan 8. Some correction will improve the technical 'health' of the chart.

Daily technical indicators are well inside their overbought zones. Remember that an index (or a stock) can remain overbought for long periods. Corrections - if and when they happen - should be treated as adding opportunities.

There is no point in waiting for a correction, or selling in a panic. Neither should one jump in feet first near an index top. Stay calm, be selective, look for quality and take a long-term view.

Q3 (Dec '17) results declared by India Inc. so far have been encouraging. However, the concern about a jobless growth remains. The government is trying to make business in India easier for foreign entities. Uncontrolled hooliganism by fringe saffron groups is putting a spanner in the works.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new high for the 8th week in a row. Since 8 is a number in the Fibonacci series, technical traders may use it as an excuse to book profits next week.

The index is trading well above its rising weekly EMAs in a bull market. Weekly technical indicators are inside their respective overbought zones. Any correction can be used to add to existing holdings.

Nifty's TTM P/E has increased to 27.61 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is emerging from its overbought zone, and can limit index upside. 

Bottomline? Sensex and Nifty charts have closed at new highs once more. Q3 (Dec '17) results of India Inc. are showing better-then-expected earnings improvements thanks to a lower base effect due to demonetisation in Q3 (Dec '16). Follow a 'buy the dips' strategy.

S&P 500 and FTSE 100 charts (Jan 05, 2018): touch lifetime highs

S&P 500 index chart pattern

The following comment was made in the previous post on the daily bar chart pattern of S&P 500: "Since the index is trading above its three rising EMAs in a bull market, an upward breakout from the 'flag' is the most logical outcome."

Bulls literally jumped out of the blocks in the New Year. The index broke out above the 'flag' pattern on Jan 2 and then soared to a new high (2743) on Jan 5.

All three EMAs are rising, and the index is trading way above them in a bull market. Daily technical indicators are well inside their overbought zones, and can trigger a pullback towards the top of the 'flag'.

Can the index go on rising in 2018? It would help bulls technically if there is a decent 5-10% correction first. On long-term weekly and monthly charts, RSI has reached overbought levels not seen in 20 years, as per this article. 

On longer term weekly chart (not shown), the index closed at a lifetime high - way above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are well inside their overbought zones. Slow stochastic is showing negative divergence by failing to touch a new high. 

FTSE 100 index chart pattern

The daily bar chart pattern of FTSE 100 faced just a day of profit booking when trading began in the New Year on Jan 2. Bulls jumped in to 'buy the dip'. The index rose to touch new intra-day (7728) and closing (7724) highs on Jan 5.

The index is trading well above its three rising EMAs in a bull market. Daily technical indicators are looking overbought. RSI and Slow stochastic are showing negative divergences by failing to touch new highs with the index.

Some correction or consolidation is likely. Stay invested, but control the urge to buy when the index is at a lifetime high. (At the time of writing this post, FTSE is trading 8 points lower.)

On longer term weekly chart (not shown), the index touched a new high and closed above its three rising weekly EMAs in a long-term bull market. Weekly MACD and RSI are in bullish zones but showing negative divergences by failing to touch new highs with the index. Slow stochastic is well inside its overbought zone and can trigger a correction.