Gold and Silver charts: break out upwards from consolidation zones

Gold chart pattern

The daily bar chart pattern of Gold shows three clearly identifiable consolidation patterns - a 'falling wedge', a 'rectangle' and a 'symmetrical triangle'. All three patterns formed after the 'golden cross' of the 50 day EMA above the 200 day EMA technically confirmed a bull market.

After breaking out above the 'symmetrical triangle' on Wed. Jul 17, gold's price touched a 52 week high of 1454 on Thu. Jul 18. Note that all three technical indicators showed negative divergences by touching lower tops, which triggered a pullback to the top of the 'triangle'.

Daily technical indicators are in bullish zones after correcting overbought conditions, but are not showing much upward momentum. MACD is moving sideways below its falling signal line. RSI is hovering just below its overbought zone. Slow stochastic has bounced up after slipping below its 50% level.

The US Dollar index has been consolidating sideways between 96.40 and 97.20 since Jul 5. Gold's price consolidated sideways in tandem. After touching a low of 96.40 on Jul 19, the Dollar index has been climbing towards 97.20.

On longer term weekly chart (not shown), gold’s price closed well above its three rising weekly EMAs in long-term bull territory. Weekly technical indicators are inside their respective overbought zones. Some price correction or consolidation may follow.

Silver chart pattern

The daily bar chart pattern of Silver consolidated within a bullish 'flag' pattern from which an upward breakout occurred on Mon. Jul 15. Rising volumes propelled silver's price to a 52 week high of 16.62 on Fri. Jul 19 before profit booking caused a fall just below 16.20.

Silver's price has since bounced up to close just above 16.40, and well above its three EMAs in bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market. 

Daily technical indicators are looking bullish and overbought. MACD and RSI are rising inside their respective overbought zones. Slow stochastic is correcting inside its overbought zone - hinting at some near-term price consolidation or correction.

On longer term weekly chart (not shown), silver's price tested resistance from its 200 week EMA, and closed well above its 20 week and 50 week EMAs in a long-term bear market. Weekly technical indicators are looking bullish and showing upward momentum. 

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. 

Gold and Silver charts: bears remain on top

Gold chart pattern

The following remark appeared in the previous post on the daily bar chart pattern of Gold: "Slow stochastic has entered its overbought zone, and can trigger a pullback towards the top of the 'wedge'."

The expected pullback turned into a correction. Gold's price dropped back inside the 'falling wedge' (which is the 'handle' of a large 'cup and handle') pattern, and fell below its three EMAs into bear territory.

After touching a low of 1269 on May 21, Gold's price bounced up to close above its 200 day EMA - keeping bullish hopes alive. Recent volume spikes on up days indicate buying interest.

Daily technical indicators are looking neutral to bearish. MACD is facing resistance from its signal line in bearish zone. RSI is facing resistance from its 50% level. Slow stochastic has bounced up from the edge of its oversold zone. Gold's price may make another attempt to break out above the 'wedge'.

After touching a high of 98.26 on May 23 - its highest level in 2 years - the US Dollar index dropped to a low 97.40 on May 24, limiting the upside on Gold's price.

On longer term weekly chart (not shown), gold’s price bounced up after receiving support from its 200 week EMA, and closed just below its 20 week EMA in long-term bull territory. Weekly technical indicators are looking neutral to bearish. MACD is falling below its signal line in bullish zone. RSI is moving sideways at its 50% level. Slow stochastic is moving sideways at the edge of its oversold zone.

Silver chart pattern

The (purple) down trend line has been dominating the daily bar chart pattern of Silver for the past three months, showing that bears are clearly on top, and in no mood to relinquish their advantage.

A few recent attempts at upward break outs have faced strong resistances from the trend line and the 20 day EMA. Silver's price is trading below its three falling EMAs in a bear market.

Daily technical indicators are in bearish zones, but showing slight upward momentum. MACD is facing resistance from its falling signal line. RSI has bounced up from the edge of its oversold zone. Slow stochastic has emerged from its oversold zone.

On longer term weekly chart (not shown), silver's price is trading below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones and showing downward momentum - suggesting some more correction. 

Gold and Silver charts: bulls staging a come back?

Gold chart pattern

The following comment appeared in the previous post on the daily bar chart pattern of Gold: "The past 2 months' trading has formed the 'handle', which itself is looking like a 'falling wedge' from which the likely breakout is upwards."

Note that gold's price twice dropped below its 200 day EMA into bear territory, but formed a small 'double bottom' reversal pattern. That triggered a technical bounce that has broken out above the 'falling wedge' (which is the 'handle' of a 'cup and handle') pattern.

A strong volume surge accompanied the upward break out - validating it technically. Gold's price managed to close above the 1300 level, and well above its three EMAs in bull territory after a month. 

Daily technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI is climbing above its 50% level. Slow stochastic has entered its overbought zone, and can trigger a pullback towards the top of the 'wedge'.

After touching a high of 98.10 on Apr 26 - its highest level in 2 years - the US Dollar index dropped to a low 96.80 on May 13. Gold's price usually moves in the opposite direction to the Dollar index.

On longer term weekly chart (not shown), gold’s price bounced up after receiving support from its 200 week EMA, and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are giving conflicting signals. MACD is moving sideways below its falling signal line in bullish zone. RSI is rising above its 50% level. Slow stochastic has emerged from its oversold zone, and can trigger a rally.

Silver chart pattern

The daily bar chart pattern of Silver had formed a 'double top' reversal pattern back in Feb '19, and has been in a down trend (marked by purple trend line) since then.

A couple of recent attempts to break out above the trend line and the falling 20 day EMA have come to nought. Silver's price is trading below its three falling EMAs in a bear market.

A silver lining for bulls is the formation of a small 'double bottom' reversal pattern near the 14.60 level. Whether the support at 14.60 holds or not remains to be seen.

Daily technical indicators are in bearish zones, and not showing any upward momentum. MACD has merged with its signal line. RSI is moving sideways below its 50% level. Slow stochastic has dropped below its 50% level after briefly moving above it.

On longer term weekly chart (not shown), silver's price is trading below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones and showing downward momentum - suggesting some more correction. 

Gold and Silver charts: bears back on top

Gold chart pattern

The daily bar chart pattern of Gold appears to have formed a bearish pattern of 'lower tops, lower bottoms' during the past two months. However, bulls need not lose heart just yet.

Why? A couple of technical reasons: (1) Gold's chart indicates formation of a large 'cup and handle' pattern - with a possible upward breakout above 1350; (2) The past 2 months' trading has formed the 'handle', which itself is looking like a 'falling wedge' from which the likely breakout is upwards.

There is an important caveat. Gold's price had dropped below its 200 day EMA into bear territory, and touched a low of 1266 on Apr 23 before recovering a bit. A fall below 1260 - which is at the mid-point of the 'cup' - can negate the 'cup and handle' pattern.

Daily technical indicators are looking bearish. MACD is facing resistance from its falling signal line in bearish zone. RSI is below its 50% level. Slow stochastic has emerged from its oversold zone, but its upward momentum has stalled.

After touching a high of 98.10 on Apr 26 - its highest level in 2 years - the US Dollar index has slipped below 97.50 on Apr 2. Gold's price tends to move in the opposite direction to the Dollar index.

On longer term weekly chart (not shown), gold’s price bounced up after receiving support from its 200 week EMA, and closed above its three weekly EMAs in long-term bull territory. Weekly technical indicators are looking bearish. MACD is falling below its signal line in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has fallen inside its oversold zone, and can trigger a technical bounce.

Silver chart pattern

The brief foray into bull territory during the first two months of the year appears to have come to an end for the daily bar chart pattern of Silver. 

Silver's price has formed a bearish pattern of 'lower tops, lower bottoms' and is trading below its three EMAs in a bear market. Throughout April '19, silver's price faced resistance from its 50 day EMA, and fell further below its falling 200 day EMA.

Daily technical indicators are in bearish zones. MACD has merged with its signal line. RSI is below its 50% level. Slow stochastic has emerged from its oversold zone, but not showing much upward momentum.

On longer term weekly chart (not shown), silver's price faced resistance from its 20 week EMA, and closed below its three weekly EMA in a long-term bear market. Weekly technical indicators are looking neutral to bearish. MACD is in neutral zone. RSI is moving sideways below its 50% level. Slow stochastic has entered its oversold zone. Some more correction is possible.

Sensex, Nifty charts (Apr 12, 2019): consolidating after touching new highs

FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 43.5 Billion during the week. DIIs were net buyers of equity on Wed. Apr 10 but net sellers on the other four days. Their total net selling was worth Rs 8.8 Billion, as per provisional figures.

The Index of Industrial Production (IIP) in Feb '19 grew 0.1% - the slowest since a contraction of 0.3% in Jul '17 - due to 8.8% decline in capital goods and 0.3% decline in manufacturing. IIP was 1.4% in Jan '19 and 6.9% in Feb '18.

India's Consumer Price Index (CPI) based inflation rose to 2.86% in Mar '19 from 2.57% in Feb '19, but remained comfortably within RBI's target of 4%. For FY 2018-19, CPI declined to 3.41% from 3.59% in FY 2017-18.

BSE Sensex index chart pattern

After touching a new high of 39270 on Wed. Apr 3, the daily bar chart pattern of Sensex faced some expected profit booking, and pulled back towards its rising 20 day EMA.

The index is consolidating sideways with a downward bias, and appears to have formed a small 'falling wedge' pattern from which an upward breakout is likely. 

Daily technical indicators are giving conflicting signals. MACD has crossed below its signal line in bullish zone. ROC is below its falling 10 day MA in neutral zone. RSI is rising towards its overbought zone. Slow stochastic is falling towards its 50% level.

Despite strong buying by FIIs, the index closed 95 points lower for the week. Interestingly, the index lost more than 350 points on Wed. Apr 10, even though both FIIs and DIIs were net buyers. Some more near-term consolidation is possible.

The reason why many small investors lose money in the stock market is because they get caught up in bullish euphoria and enter near a market top. So, how does one decide whether the market will move higher or correct from here?

One way is to look at the trailing 12 months (TTM) index P/E. Historically, Sensex P/E above 22 is considered 'overbought'. Sensex P/E is above 28 now. Does that mean that the near-term index upside is limited? 

The answer is: Yes. FIIs are probably betting that earnings will catch up soon, and lower the P/E ratio. But if we get another quarter of tepid earnings from India Inc., FIIs may rush to the exit door.

NSE Nifty index chart pattern

The following comment was made in last week's post on the weekly bar chart pattern of Nifty: "The breakout above the channel still isn't a convincing one, though the index did touch a new high (by 0.8 points)."

Though FIIs were strong buyers of equity, the index closed 22 points lower for the week, and pulled back to the top of the trading channel. Such pullbacks usually provide buying opportunities.

The index is trading well above its weekly EMAs in a bull market. However, one should be cautious near a lifetime index high. A good look at what happened after Nifty touched its previous high in Aug '18 should clear any doubts. 

Weekly technical indicators are looking bullish and overbought. MACD is above its signal line and rising towards its overbought zone. ROC, RSI and Slow stochastic are inside their respective overbought zones.

Nifty's TTM P/E has reduced a bit to 29.06, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped down from the edge of its oversold zone, and can trigger near-term index upside.

Bottomline? Sensex and Nifty charts are consolidating near the upper edges of their respective upward-sloping trading channels, and may face some more consolidation or correction before moving up further. Dips can be used to add.

How to be a successful Contrarian Investor

To be a successful contrarian investor, you need to follow Buffett's simple philosophy: Be greedy when others are fearful and be fearful when others are greedy.

In other words, a contrarian investor will look for opportunities to buy when there is blood on the streets and experts are advising that the economy will get a lot worse before it gets any better.

Likewise, a contrarian will look to book profits when the stock market is rising to new highs and everyone and his brother-in-law is offering tips on what to buy.

Simple, right? But almost impossible to follow when it is your own money on the line. The human brain seems to function irrationally when monetary transactions involve uncertain outcomes - like in the stock market.

Doing the exact opposite of what a consensus view is suggesting requires training and discipline. Knowledge of basic technical analysis tools can be of great help.

Here are some typical contrarian signals that even novice investors can learn to spot:

1. A stock's price is touching new highs, but volumes are falling
2. An index keeps rising but technical indicators are flat or falling
3. A stock's price touches a new low, but technical indicators touch higher bottoms
4. Widening distance between a stock's price and its 200 day EMA
5. An index is moving up but the number of declining stocks is more than the number of advancing stocks

The above list is not meant to be exhaustive - just indicative. 

Being able to spot certain chart patterns that indicate the opposite of what the price action is suggesting can also help a lot. E.g. a stock's price is falling but trading within a 'falling wedge' pattern indicates a likely breakout upwards.

Similarly, if a stock's price is rising but trading within a 'rising wedge', it is a signal for a correction.

Needless to say, buying or selling a stock just based on price patterns and contrarian indications is not enough. Adequate research about a company's financials and investment-worthiness should be carried out before taking any buy/sell decisions about its stock.

Also, refrain from buying or selling just because a stock has risen 20% or an index has fallen 20%. A rising stock can rise even higher, and a falling index can fall even lower.

How does one know beforehand how far a falling index will fall? What if it falls first, then rises again before falling even further?

One really can't tell beforehand. Again, some knowledge of technical analysis can be helpful. 

Those who have been regularly reading my posts know about long-term 'support-resistance' levels and Fibonacci retracement levels - and the roles these levels play time and again.

Most important of all, to be a really successful contrarian investor, you need to have oodles of patience. Waiting for the right price to buy or sell - without trying to catch the exact market bottom or top - will add several percentage points to your eventual returns.

Nifty chart: a midweek technical update (Dec 28 '16)

FIIs continue to remain bearish. Their net selling in equities during the first three trading days of the week was worth Rs 23.3 Billion. DIIs were net buyers of equity worth Rs 33.9 Billion, as per provisional figures.

Thanks to DII buying, Nifty has managed to bounce up after slipping below its previous (Nov 21) low of 7916 on Mon. Dec 26. Is the worst over for bulls?

The government now requires tax defaulters to first pay 49.9% tax and make a 25% (4 years, zero-interest) deposit to avail of the PMGKY scheme. Those already under scrutiny or prosecution will not be eligible for the scheme.

The daily bar chart pattern of Nifty touched a slightly lower bottom of 7894 on Boxing Day, but managed to close just above the psychological 7900 level. DII buying helped the index to recover some lost ground during the next two days.

The index appears to have formed a 'double bottom' reversal pattern, keeping bullish hopes alive. But looks can deceive. Technical confirmation of a 'double bottom' requires volumes to be higher during and after formation of the second bottom. However, volumes (not shown on chart) have actually been lower. 

Also, the index faced strong resistance from the falling 20 day EMA and the 8100 level during today's trading and closed near the day's low. In the process, Nifty formed a 'shooting star' candlestick pattern that often triggers a down move. 

The 'death cross' (marked by grey ellipse) of the 50 day EMA below the 200 day EMA has technically confirmed a bear market. The breadth indicator NSE TRIN (not shown) is moving up towards its oversold zone. Some correction or consolidation is likely.

Daily technical indicators have corrected oversold conditions, but remain in bearish zones. The 4 months long down trend is dominating the Nifty chart. There seems little respite for bulls in the near term. 

(It is possible that the entire trading from Nov 10 onwards has formed a large 'falling wedge' pattern from which a break out can occur upwards. No buying is recommended in such an event. Buy only if Nifty moves convincingly above its 200 day EMA.)

A convincing breach of the 7900 level can drop Nifty to the zone between 7500 and 7700. No need for bottom fishing now. Wait for Q3 (Dec '16) results to find out how badly India Inc's earnings have been hit by demonetisation.

If you are hell-bent on buying, choose only top quality stocks.   

Is this a good time to enter SBI stock? - a technical update

The previous technical update to the stock chart pattern of State Bank of India (posted on Apr 2013) contained a bearish view for the following two reasons:

(1) formation of a head-and-shoulders reversal pattern with a downward target of 155 (adjusted for 10:1 stock split in Nov 2014); (2) large unreported NPAs of most PSU banks that exerted downward pressure on the prices of their stocks.

SBI's stock price had corrected down to 145.30 in Aug '13 - overshooting the downside target of the head-and-shoulders pattern. It then rose to 200, only to correct down once again to 145.60 in Feb '14 - forming a 'double bottom' reversal pattern.

The subsequent rally took the stock to a high of 283.40 on May 26 '14, but a 'reversal day' pattern (higher high, lower close) triggered a 6 months long sideways consolidation.

The stock touched a high of 296.80 on Nov 19 '14 - the day before it started trading ex-split (10:1). Such a split is often followed by selling, but the stock continued to rally and rose to touch a high of 335.90 on Jan 28 '15 - short of the lifetime high of 351.50 (touched on Nov 8 '10).

Three of the daily technical indicators - MACD, ROC, RSI - showed negative divergences by touching lower tops even as the stock closed at a 2 years closing high price of 334.45. That was just the signal bears needed.

A 13 months long correction culminated with the formation of a 'falling wedge' pattern, with the stock testing its Feb '14 low on Feb 25 '16. All four technical indicators showed positive divergences by touching higher bottoms (marked by blue arrows).

That triggered an expected upward breakout from the 'falling wedge' and started a rally that is still going strong. 

Note that the first leg of the rally took the stock above its 20 day and 50 day EMAs, followed by a correction that touched a higher bottom on May 23 '16 - a classic technical signal that the bear market was over.

A move above all three EMAs into bull territory, followed by the 'golden cross' of the 50 day EMA above the 200 day EMA (marked by dotted rectangle) on Jul 20 '16 technically confirmed a return to a bull market.

The stock has corrected below its 20 day and 50 day EMAs. All four technical indicators are looking bearish, and three of them - ROC, RSI, Slow stochastic - are looking oversold.

Though some more correction can't be ruled out, the dip is providing an entry opportunity.

Sensex and Nifty charts have formed intermediate bottoms (Nov 25 '16)

Selling by FIIs abated a little during the week gone by. Their total net selling in equities was Rs 54.1 Billion, as per provisional figures. DIIs bought heavily. Their total net buying in equities touched Rs 61.9 Billion.

Both Sensex and Nifty breached their previous lows (the possibility was mentioned in last week's post), but recovered to gain about 0.5% on a weekly closing basis.

Demonetisation of bank notes continued to roil both houses of Parliament. Opposition parties joined forces in a desperate bid to project themselves as pro-poor when they were really protesting against the loss of their 'slush' funds.

In a surprising move, RBI has temporarily increased CRR to 100% in a bid to suck out excess liquidity from banks that was being parked in govt. bonds. Yields are expected to rise and bank share prices may take a hit.

BSE Sensex index chart pattern

The Daily bar chart pattern of Sensex dropped to an intra-day low of 25718 on Mon. Nov 21, and closed below its Nov 9 'panic bottom' of 25902 - proving once again that 'panic bottoms seldom hold'.

After consolidating sideways around the support level of 25900 for the next three days, the index bounced up strongly to close above the 26300 level.

The index is trading below its three EMAs in bear territory and is well below the blue down trend line. The 20 day EMA has crossed below the 200 day EMA. The 'death cross' of the 50 day EMA below the 200 day EMA, which technically confirms a bear market, appears imminent.

The down trend that started after Sensex touched a high of 29077 on Sep 8 continues. Bears definitely have the upper hand.

However, there are technical signs that the index has found an intermediate bottom and a pullback rally has started.

All four technical indicators are looking oversold, but are showing slight upward momentum as they try to emerge from their respective oversold zones. 

ROC is showing positive divergence by not falling lower with the index. MACD and Slow stochastic have formed small 'rounding bottom' reversal patterns inside their oversold zones. RSI has formed an 'inverse head and shoulders' like reversal pattern inside its oversold zone.

Since touching the 'panic bottom' on Nov 9, the index had formed a small 'falling wedge' pattern, from which it broke out upwards on Fri. Nov 25.

By touching a low of 25718 on Nov 21, the index retraced 61.7% of its entire rally from 22495 (Feb 29 low) to 29077 (Sep 8 top). That is almost the same as the 61.8% Fibonacci retracement level.

A combination of value buying and short-covering can propel Sensex towards its 200 day EMA (at about 27000). That can be a trigger for bears to strike again. Bulls may try to wrest control with a convincing rally above 27600. 

The market appears to have discounted most of the likely adverse fallouts of the demonetisation drive. Lengthy queues in front of banks and ATMs have been shrinking.  

Time to take out your 'buy list'. Accumulate slowly instead of buying in bulk. Some more consolidation or correction can't be ruled out. 

NSE Nifty index chart pattern

The following comments appeared in last week's post on the weekly bar chart pattern of Nifty: "The index had formed a high-volume 'panic bottom' in the previous week. A 'panic bottom' seldom holds. A drop below 8000 seems likely."

The index touched an intra-week low of 7916 before bouncing up to close above 8100. 

In the process, Nifty formed a 'reversal week' bar (lower low, higher close) - as well as a 'hammer' candlestick pattern. Both can be bullish reversal patterns.

Of the four weekly technical indicators, MACD is falling below its signal line and looks poised to enter negative zone. ROC, RSI and Slow stochastic are looking oversold.

A pullback rally towards 8300 is likely. Bears will probably use the opportunity to sell. A convincing move above 8570 is required if bulls wish to regain control.

Bottomline? Sensex and Nifty charts may have formed intermediate bottoms. Valuations have improved, but weak earnings growth of India Inc. may continue for a quarter or two more. Be cautiously optimistic that the worst is over. Any pullback rally can trigger bear selling.

WTI and Brent Crude Oil charts: correcting after sharp rallies

WTI Crude Oil chart

The daily bar chart pattern of WTI Crude Oil corrected below the 50 level, formed a small 'double bottom' pattern and then rose with good volume support to touch a new 52 week intra-day high above the 52 level on Oct 19.

Oil's price subsequently corrected below 50 on Oct 24, but bounced up a bit after receiving good support from its rising 20 day EMA. All three EMAs are rising, and oil's price is trading above them in a bull market.

Note that all three daily technical indicators are in bullish zones, but touched lower tops (marked by blue arrows) when oil's price rose higher. The combined negative divergences triggered a correction.

The entire rally since the Aug '16 low may be forming a large 'rising wedge' pattern from which the likely breakout is downwards.

On longer term weekly chart (not shown), oil's price is trading 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 in bullish zones, but not showing any upward momentum.

Brent Crude Oil chart

The following comments appeared in the previous post on the daily bar chart pattern of Brent Crude Oil: "Fundamentally, not much has changed on the supply front. Some correction or consolidation can be expected."

Since then, oil's price has been correcting within a downward-sloping channel. On Oct 24, it dropped below its 20 day EMA intra-day, but bounced up after receiving good support from the 50.50 level.

Daily technical indicators are looking bearish and showing downward momentum. Some more correction/consolidation within the channel is likely.

There is a possibility that the downward channel may turn out to be a 'flag' or a 'falling wedge' - both of which have bullish implications. 

On longer term weekly chart (not shown), oil's price is trading 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 in bullish zones but showing a bit of downward momentum.

Nifty chart: a midweek technical update (Sep 28 '16)

FIIs were net sellers of equity on Mon. and Tue. while DIIs were net sellers of equity on Mon. and Wed. FIIs were net buyers on Wed. while DIIs were net buyers on Tue.

Total net selling of equities by FIIs was worth Rs 290 Crores. Total net selling by DIIs was worth Rs 90 Crores - as per provisional figures. The comparatively lower numbers are due to uncertainty during F&O expiry week.

In a sign of recovery, India's seafood exports for the Apr-Aug '16 period was higher by 7% on volume terms over the same period last year. In value terms, exports were higher by 17% - wiping out the entire loss of 2015.

In last week's post on the daily bar chart pattern of Nifty a couple of bearish scenarios and a bullish scenario were discussed. The balance appears to be tilting towards the bears.

The index has been consolidating sideways within a 'descending triangle' pattern since touching a 52 weeks high of 8969 on Sep 7. Such a triangle - when formed at a market top - can be a trend reversal pattern.

A 'descending triangle' has measuring implications. If the lower support level (8690) gets breached, the index can fall a distance equal to the height of the triangle (about 280 points).

That gives a downside target of about 8410 - which is the upper level of 'Runaway Gap3'. If the index does fall there, use the opportunity to buy.

The index has already touched the downward sloping trend line twice and the flat support level of 8690 twice. As per theory of triangles, a breakout can occur at any time.

Since triangle patterns are unreliable, it may be prudent to wait for the breakout. A convincing move above 8850 can negate the 'descending triangle'.

Things can change quickly on a price chart. Note that a small fall below the triangle and a subsequent quick recovery can turn the bearish 'descending triangle' into a bullish 'falling wedge' pattern. 

Daily technical indicators are giving mixed signals. MACD (in positive zone) and Slow stochastic (in oversold zone) are showing downward momentum. RSI is moving sideways in neutral zone.

Nifty's TTM P/E is still high at 23.97. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone and rising. Some more consolidation within the triangle and/or a breakout below it is possible.

Don't hit the panic button. But if you are sitting on good profits, take some of it off the table.

WTI and Brent Crude Oil charts: an update

WTI Crude Oil chart

In the previous post on the daily bar chart pattern of WTI Crude Oil, a 'reversal day' bar on daily chart and a 'gravestone doji' candlestick on weekly chart had raised concerns about the formation of an intermediate top, with a correction to follow.

That is exactly what oil's price did - falling to its 50 day EMA, bouncing up to a lower top and then dropping below its 50 day EMA on BrExit concerns.

Bulls need not lose hope just yet. Oil's price is trading above its rising 200 day EMA in bull territory. Though the correction has formed a bearish pattern of 'lower tops, lower bottoms', the pattern may turn out to be a 'falling wedge' or a 'flag' - both of which have bullish implications.

All three daily technical indicators are looking bearish and showing downward momentum - hinting at some more correction.

On longer term weekly chart (not shown), oil's price has formed a small 'rounding top' bearish pattern and is seeking support from its 50 week EMA. It continues to trade well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are correcting overbought conditions.

Brent Crude Oil chart

In the previous post on the daily bar chart pattern of Brent Crude Oil, a 'reversal day' bar on daily chart and negative divergences visible on MACD and Slow stochastic had hinted at the formation of an intermediate top, with a correction to follow.

Oil's price did as expected. It dropped to seek support from its 50 day EMA, bounced up to touch a lower top and then dropped below its 50 day EMA on BrExit concerns.

Bulls can take solace from the fact that oil's price is trading above its rising 200 day EMA in bull territory. The correction has formed a bearish pattern of 'lower tops, lower bottoms'. There is a possibility that the pattern may evolve into a 'falling wedge' or a 'flag' - both having bullish implications.

All three daily technical indicators are looking bearish and showing downward momentum. Some more correction is likely.

On longer term weekly chart (not shown), oil's price has dropped to seek support from its 50 week EMA. It is trading well below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are correcting overbought conditions.

Stock Chart Pattern - Infosys Ltd. (An update)

Bobby Hebb wrote the song 'Sunny' within 48 hours of a double tragedy on Nov 22, 1963. That was the day popular and charismatic US President John Kennedy was assassinated - and Bobby's elder brother was stabbed to death outside a Nashville nightclub.

What does that have to do with the chart pattern of Infosys? Well, Infosys also suffered a double tragedy - due to their disastrous policy of rotating the company's leadership among the original promoters.

As mentioned in the previous update, the two promoter-CEOs that followed Narayanamurthy and Nilekani neither had the dynamism nor the leadership skills required for a company with global aspirations.

With the induction of a professional manager with leadership experience in a global company (SAP), Infosys is ready to sing the following line from the song: "Now the dark days are gone, and the bright days are here". 

Should they? Let us see what the chart foretells.

The closing chart pattern of Infosys Ltd. touched a low of 553 in Apr '13 (adjusted for two subsequent 1:1 bonus offerings - marked by blue bells - in Dec '14 and Jun '15). 

The stock formed a 'double top' reversal pattern at around 950 (in Jan '14 and Mar '14). Negative divergences in three of the four technical indicators (marked by blue arrows) led to a correction within a 'falling wedge' pattern with bullish implications.

An upward breakout from the wedge started a fresh leg of the bull rally that culminated with another 'double top' reversal pattern at around 1180 (in Aug '15 and Oct '15). 

Once again, negative divergences in three of the four technical indicators (marked by blue arrows) led to a correction below the three daily EMAs, but the stock formed a small 'double bottom' reversal pattern and bounced up.

Daily technical indicators are in bullish zones, but giving mixed signals. The stock price has been consolidating sideways within a large 'rectangle' pattern between 960 and 1180 (i.e. 220 points) for the past 14 months.

Rectangles are usually 'continuation' patterns, with price target implications. An expected upward breakout can take the stock to a target of 1400 (= 1180 + 220).

But a 'rectangle' can also be a 'reversal' pattern - in which case, the downward target will be 740 (= 960 - 220). 

Since the stock is trading in a bull market (above its three EMAs), one can use the 'consolidation' to accumulate with a stop-loss at 1020.

[Wishing all blog visitors, blog followers, blog subscribers, twitter followers and newsletter subscribers a very happy and prosperous 2016.] 

BSE Sensex and NSE Nifty 50 index chart patterns – Sep 11, 2015

FIIs remained net sellers of equity during the week, with their net sales exceeding Rs 2800 Crores. DIIs were net buyers of equity worth Rs 2600 Crores. Yet, both Sensex and Nifty closed higher on a weekly basis after 4 straight weeks of lower closes. So, who else bought? As per anecdotal evidence, it was you and me (i.e. small investors).

There was good news on the manufacturing front. The IIP number for July ‘15 was 4.2%, which was a huge improvement over the 0.9% figure of Jul ‘14, but slightly less than the revised figure of 4.4% in Jun ‘15. The consumer non-durables sector was a concern, as it contracted 4.6%.

The Current Account Deficit was lower at $6.2 Billion during Q1 (Jun ‘15) compared with $7.8 Billion in Q1 (Jun ‘14). Lower crude oil prices contributed significantly to the reduction in deficit. The lack of strength in the Rupee has not been commensurate because of falling exports.

BSE Sensex index chart

The daily bar chart pattern of Sensex had formed a downward ‘gap’ on Aug 24 ‘15. It has been trading below the ‘gap’ since then. The ‘death cross’ of the 50 day EMA below the 200 day EMA has technically confirmed a bear market.

However, there is a good chance that the bear market will be a short one – more of a strong correction in a bull market. Why? Because of certain technical patterns formed during the week.

The index touched an intra-day low of 24852 and closed at a 52 week low of 24894 on Mon. Sep 7. On Tue. Sep 8, the index touched a lower intra-day low of 24834 but closed almost 400 points higher – forming a ‘reversal day’ pattern. The 12 days of trading since forming the ‘gap’ was within a ‘falling wedge’ pattern.

On Wed. Sep 9, Sensex broke out above the ‘falling wedge’ with an upward ‘gap’ – thanks to DII buying. A break out with a ‘gap’ is considered to be technically more significant. As often happens after a break out, the index pulled back to the top of the ‘falling wedge’ the next day before bouncing up.

Does that mean the down trend from the Mar ‘15 lifetime high is over? That can only be confirmed once Sensex moves up to fill the ‘gap’ and crosses above its three falling EMAs. Bears (read FIIs) may not allow that to happen any time soon.

Daily technical indicators have corrected oversold conditions but are yet to turn bullish. MACD has moved up to touch its falling signal line inside its oversold zone. RSI bounced up from its oversold zone, but is moving sideways below its 50% level. Slow stochastic is trying to climb up to its 50% level.

Sensex line chart based on daily closing levels (not shown) may be forming an inverse head-and-shoulders reversal pattern, with a neckline at 25750. If the index can close above 25750 with strong volume support, it will provide a good buying opportunity for long-term investors.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty formed a ‘reversal bar’ (lower low, higher close) that may have ended the intermediate down move of the past 4 weeks. But it may be too soon to expect an immediate reversal of the 6 months long down trend from the lifetime high touched back in Mar ‘15.

The 20 week and 50 week EMAs are both falling and the index is trading below them as well as below a rare weekly ‘gap’ formed on the chart in the week ending on Aug 28 ‘15. However, the 200 week EMA is still rising, and the index has closed more than 850 points above it. The long-term bull market is intact.

Weekly technical indicators are in bearish zones and looking oversold. MACD and Slow stochastic have dropped to the edge of their oversold zones. RSI has bounced up a bit near the edge of its oversold zone.

The monsoon rain deficiency has caused drought-like conditions in Rajasthan and a couple of other states. Water reservoirs in several states have fallen enough to cause serious concerns. Agricultural output is likely to be affected – so expect food prices to rise. Already price of pulses have reached the three figure mark. That may put a question mark on further interest rate cuts by RBI.

Bottomline? The bar chart patterns of Sensex and Nifty are trading below bearish ‘gaps’, but there are some technical signs of trend reversal. Long-term bull markets are still intact. Stay cautiously optimistic. Maintain stop-losses – whether you decide to add or hold. If FIIs continue their selling spree, all bullish bets will be off.