Gold and Silver charts: an update

Gold Chart Pattern

The bear market rally on the daily bar chart pattern of gold appears to have ended. In the previous post, the possibility of an upward break out from an ‘inverse head and shoulders’ pattern (with a neckline at 1220) was mentioned. But it turned out to be a case of pattern failure.

Gold’s price had made one abortive attempt to break out above the neckline at 1220. It subsequently dropped into a consolidation range between 1180 and 1210. It closed just below the 20 day EMA, and is trading well below its falling 200 day EMA in a bear market.

Technical indicators are turning bearish. MACD is moving sideways just above the ‘0’ line. RSI has slipped below its 50% level. Slow stochastic formed a ‘double top’ reversal pattern and dropped below its 50% level.

Strong volumes on recent down-days indicate that bears are beginning to regain control.

On longer term weekly chart (not shown), gold’s price faced resistance from its 20 week EMA, and is trading below its three weekly EMAs in a long-term bear market. Technical indicators are in bearish zones, and showing signs of downward momentum.

Silver Chart Pattern

The daily bar chart pattern of silver failed to sustain above the 17 level. Bear selling dropped silver’s price below its 20 day and 50 day EMAs, and the 16 level. The brief bear market rally during Mar ‘15 is over.

Daily technical indicators are in bearish zones. MACD is falling below its signal line in negative territory. RSI is below its 50% level and showing downward momentum. Slow stochastic has re-entered its oversold zone.

Strong volumes on down-days is a sign of bear dominance. Silver’s price may again test support from the zone between 15 and 15.50.

On longer term weekly chart (not shown), silver’s price closed well below its three weekly EMAs in a long-term bear market. Technical indicators are in bearish zones, and showing strong downward momentum.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Apr 17, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 continued its sideways consolidation within a ‘symmetrical triangle’ pattern. The index faced resistance from the upper edge of the triangle and dropped sharply below its 20 day EMA, but managed to close above its 50 day EMA – losing 1% on a weekly basis.

The index is trading well above its rising 200 day EMA in a bull market. So, the expected break out from the ‘symmetrical triangle’ – which is usually a continuation pattern – is upwards. But since triangles tend to be unreliable, it would be prudent to wait for the break out before deciding to buy or sell.

Technical indicators are showing a bit of weakness. MACD has started to fall towards its signal line in positive zone. RSI has slipped below its 50% level. Slow stochastic has dropped down from its overbought zone.

Expect the index to consolidate sideways a little longer.

On longer term weekly chart (not shown), the index formed a ‘reversal week’ bar (higher high, lower close), but closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but MACD and RSI are showing downward momentum.

FTSE 100 Index Chart

 

The daily bar chart pattern of FTSE 100 closed at a lifetime high of 7097 on Wed. Apr 15. The next day it rose to touch a new intra-week high of 7119, but formed a ‘reversal day’ bar (higher high, lower close), and dropped to seek support from its 20 day EMA.

At the time of writing this post, the index has bounced up to trade above the 7000 level and its three daily EMAs in a bull market. Bears are not completely out of the game, as the index continues to trade within a large bearish ‘rising wedge’ pattern since the beginning of the year.

Technical indicators are in bullish zones but showing downward momentum. All three showed negative divergences by failing to touch new highs with the index.

On longer term weekly chart (not shown), the index touched a lifetime high but formed a ‘reversal week’ bar and closed below 7000. The index is trading well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showed negative divergences by failing to touch new highs with the index. The market may be getting set up for a big bear attack – so, stay invested but remain cautious.

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 17, 2015

India’s Current Account (i.e. trade) deficit was almost $12 Billion in Mar ‘15 – nearly double of the deficit in Feb ‘15. Exports were lower by more than 20%. For the fiscal year 2014-15, the deficit was $137 Billion – compared with $135 Billion in the previous fiscal year.

Sentiments remained bearish in a holiday-shortened trading week. As per provisional figures, FIIs were net sellers of equity worth Rs 365 Crores; DIIs were net buyers worth Rs 490 Crores. Both Sensex and Nifty lost ground.

Despite weak Q4 results declared by Indian companies so far, Moody’s have reaffirmed their bullish outlook for the Indian economy. The government needs to accelerate infrastructure investments to keep the economy on the growth track.

BSE Sensex index chart

The daily bar chart pattern of Sensex closed above the 29000 level on Mon. Apr 13, but it wasn’t a convincing close above the ‘support-resistance zone’ between 27350 and 28800. Bears struck swiftly and pushed the index below its entangled 20 day and 50 day EMAs inside the ‘support-resistance zone’.

Daily technical indicators are still in bullish zones, but showing downward momentum. MACD is above its signal line but looks ready to drop back inside negative territory. ROC has dropped from its overbought zone and crossed below its 10 day MA. RSI is falling towards its 50% level. Slow stochastic has fallen from its overbought zone.

Some more correction is likely. Looks like company earnings may take a couple of more quarters to catch up with market valuation. However, the index continues to trade above its rising 200 day EMA in a bull market.

Stay invested and closely study Q4 results for pockets of opportunity.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty formed a ‘reversal week’ pattern (higher high, lower close) and dropped back inside the ‘support-resistance zone’ between 8180 and 8630.

The index continues to face overhead resistance from Up trend line 2, but managed to stay above its two weekly EMAs in a bull market.

Weekly technical indicators are giving mixed signals. MACD is sliding below its signal line in positive territory. ROC is below its 10 week MA, and failed to enter positive zone. RSI is moving sideways above its 50% level. Slow stochastic crossed above its 50% level.

Expect the index to consolidate around current levels for some time before resuming its up move. IPOs and FPOs are getting oversubscribed – which is a clear indication of underlying bullish sentiment.

Bottomline? BSE Sensex and NSE Nifty charts are still feeling the effects of bearish sentiment, and have dropped back inside their ‘support-resistance zones’. Both indices are in long-term bull markets. There is no need to panic and sell. Stay invested. Maintain appropriate stop-losses for individual stocks in your portfolios.

Is the stock market defying conventional logic?

Interest rate has started coming down. So has inflation. WPI inflation is actually negative. IIP number is positive and inching up – indicating manufacturing growth.

Forex reserves are at an all-time high. Sales of medium and heavy commercial vehicles are rising – which is an indication of a recovering economy. Passenger car sales grew after 2 years of de-growth.

These are all signs of an economy that is returning to a path of growth. As per conventional logic, a growing economy should lead to a rising stock market.

So, why is the stock market defying logic? It is like asking: “Why do mosquitoes sting?”  The answer is: “It is their nature to do so.”

Experts and analysts try their level best to explain the reasons for a market correction. As if they really know.

Some said that expectations of poor Q4 results led to the correction. But everyone has been expecting poor Q4 results for quite some time.

Others said that PSU divestments and IPOs are sucking out cash from the secondary market. Weren’t these same experts saying a couple of weeks back that a lot of ‘cash is waiting in the sidelines’? 

(By the way, ‘cash waiting in the sidelines’ is one of those enduring myths in the market. Unless the cash gets invested in FPOs or IPOs, it always remains in the sidelines. Think about it.)

One talking head on a business channel said: “The market has been boosted by a liquidity driven rally.” Wonder what kind of a rally will occur without any liquidity!

The market has a tendency of going against consensus estimates and expectations. Which increases the probability that Q4 results will throw up some positive surprises.

IndusInd Bank has declared very good results. TCS came out with a decent set of numbers – if you look beyond the one-time bonus payment to employees.

Smart investors look for opportunities to buy during such corrections. That doesn’t mean you need to jump in feet first. Do your homework, be patient and wait for opportunities.

Have you looked at hospitality sector stocks lately? Most small investors are shunning them. The “e-Visa on arrival” scheme should be a huge boon for the sector.

WTI and Brent Crude Oil charts: consolidating sideways within support-resistance zones

WTI Crude chart

The daily bar chart pattern of WTI Crude oil rallied strongly after touching a 6 years low of 42.50 on Mar 17 ‘15, and re-entered the ‘support-resistance zone’ between 47.50 and 54. (Note that all three technical indicators had shown positive divergences by failing to touch new lows with oils’ price.)

After crossing above the 20 day and 50 day EMAs, oil’s price corrected down to the lower edge of the ‘support-resistance zone’, only to bounce up on strong volumes all the way to the top of the ‘support-resistance zone’. Bear selling stalled the rally.

Oil’s price is trading above its 20 day and 50 day EMAs, but well below its falling 200 day EMA in a bear market.

Daily technical indicators are in bullish zones, and showing some upward momentum. Oil’s price may make another attempt to cross above the 54 level. Expect bears to prevent that from happening.

On longer term weekly chart (not shown), oil’s price continues to trade below its three weekly EMAs in a long-term bear market. Weekly technical indicators have corrected oversold conditions, and are showing some upward momentum.

Brent Crude chart

The daily bar chart pattern of Brent Crude oil had bounced up strongly after receiving good support from the lower edge of the ‘support-resistance zone’ between 52.50 and 64. After crossing above its 20 day and 50 day EMAs, oil’s price stalled near the 60 level on Mar 26 ‘15.

Since then oil’s price has traded sideways within a band between 55 and 60. In spite of a couple of closes above its 50 day EMA, oil’s price is trading well below its 200 day EMA in a bear market.

Daily technical indicators are in bullish zones, but their upward momentum is weak. MACD is above its signal line, and somehow managed to enter positive zone after a month. RSI is moving sideways just above its 50% level. Slow stochastic is above its 50% level but not making much headway.

On longer term weekly chart (not shown), oil’s price is trading below its three weekly EMAs in a long-term bear market. Technical indicators are showing some upward momentum after correcting oversold conditions.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Apr 10, 2015

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 closed 35 points (1.7%) higher on a weekly basis, and climbed back inside the large ‘rising wedge’ pattern (see last week’s post) once again. The index is consolidating sideways within a ‘symmetrical triangle’ pattern since the last week of Feb ‘15.

Triangles are usually continuation patterns, so the likely break out from the triangle should be upwards. If that happens, the bearish ‘rising wedge’ pattern is likely to be negated. However, triangles are unreliable patterns, so it is better to wait for the eventual break out before initiating any buy/sell action.

Technical indicators are in bullish zones. MACD has crossed above its signal line and entered positive territory. RSI and Slow stochastic have climbed above their respective 50% levels. The index closed above its three EMAs in bull territory.

On longer term weekly chart (not shown), the index received good support from its 20 week EMA, and closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones but their upward momentum is weak. Be prepared for another bear attack if the index fails to break out convincingly above the triangle.

FTSE 100 Index Chart

In a holiday-truncated week, the daily bar chart pattern of FTSE 100 rallied splendidly to close at a lifetime high. The index closed above its three EMAs in bull territory, but remains within the large ‘rising wedge’ pattern within which it has been trading for the past three months.

Daily technical indicators are in bullish zones, but all three are showing negative divergences by failing to touch new highs with the index. Bears may come to the fore if the index fails to convincingly cross above the ‘wedge’ pattern.

On longer term weekly chart (not shown), the index closed at a lifetime high - well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, but showing negative divergences by failing to touch new highs with the index.

BSE Sensex and NSE Nifty 50 index chart patterns – Apr 10, 2015

There was good news on the macroeconomic front. The IIP number for Feb ‘15 was at a three-month high of 5%. The revised figure for Jan ‘15 is 2.8%. Growth was broad-based. Only consumer durables showed contraction.

Passenger car sales increased by 5% during 2014-15, after decrease of 7.7% and 4.7% in the previous two years. Commercial vehicle sales declined by 2.8%. However, sales of medium and heavy commercial vehicles increased by 16%.

In the 2-wheeler segment, motorcycle sales declined 2.5%, but scooter sales jumped 25%. A deficient monsoon last year and unseasonal rains this year affected motorcycle sales in rural India.

FIIs and DIIs were net buyers of equity during the past week. As per provisional figures, FIIs bought equity worth Rs 1150 Crores. DIIs were net buyers of Rs 240 Crores. Both Sensex and Nifty indices are back in bull territory, but facing overhead resistances.

BSE Sensex index chart

The following comment was made in last week’s analysis of the daily bar chart pattern of Sensex: “Bears may put up a fight to defend the 28800 level.”

Sensex is trading above its three EMAs in bull territory, but has so far failed to convincingly cross above the upper edge of the ‘support-resistance zone’ between 27350 and 28800.

The index has retraced nearly 60% of its 2777 points correction from its Mar 4 top of 30025 to the Mar 27 low of 27248. A retracement of more than 50% (a Fibonacci level) usually means that a correction is over.

However, a more convincing retracement of a correction will be the Fibonacci level of 61.8% – i.e. a close above 28965. Is that likely to happen soon?

Daily technical indicators are suggesting as much. MACD is rising above its signal line, and is poised to enter positive zone. The signal line is forming a bullish ‘rounding bottom’ pattern. ROC is above its 10 day MA – which has also formed a ‘rounding bottom’ pattern - in positive territory. RSI has moved above its 50% level. Slow stochastic has entered its overbought zone.

Will the index touch a new high? There should not be any doubts about that. When? That’s a good question! Let’s say – sooner rather than later.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty closed at its highest level in 5 weeks, and climbed out of the ‘support-resistance zone’ between 8180 and 8630.

The index is trading above its two weekly EMAs in bull territory, but is facing resistance from Up trend line 2. Strong volumes during the week is a good sign for bulls.

Weekly technical indicators are beginning to turn bullish. MACD is below its signal line, but has stopped falling. ROC is below its 10 week MA, but about to re-enter positive territory. RSI is moving sideways above its 50% level. Slow stochastic has stopped falling, and looks ready to start rising again.

Bears may make a last stand at current levels, but bullish sentiment is gaining ground.

Bottomline? BSE Sensex and NSE Nifty charts have almost recovered from sharp bull market corrections, but bulls still need to overcome overhead resistances. Both indices are in long-term bull markets. Mid-cap and small-cap indices are showing strength. This may be a good opportunity to get rid of some of the non-performers in your portfolios.