Gold chart pattern
The daily bar chart pattern of gold found good support from the zone between 1040 and 1060, and bounced up with good volume support above its 20 day and 50 day EMAs - boosted by the rush to safety after a panic sell-off in global stock markets.
Gold's price briefly crossed above 1110 - the highest level touched in more than 2 months. Bears resumed their dominance. Gold's price dropped below all its three EMAs before making another effort to cross above its 20 day and 50 day EMAs.
Daily technical indicators are in bullish zones, but not showing much upward momentum. With sanity prevailing in global stock markets, expect gold's price to resume its down move.
On longer term weekly chart (not shown), gold’s price faced resistance from its falling 20 week EMA, and is trading below its three falling weekly EMAs in a long-term bear market. Weekly technical indicators failed to emerge from their respective bearish zones.
Silver chart pattern
The following observation appeared in the previous post on the daily bar chart pattern of silver: "The falling 50 day EMA is proving to be an insurmountable resistance."
Silver's price tried to follow in the footsteps of the yellow metal, but its rally fizzled out as it failed to overcome the resistance from its 50 day EMA. It has dropped below all three EMAs and closed below the 14 level, and is in danger of falling below its Dec '15 low.
Daily technical indicators are not giving bulls much hope. MACD is moving sideways above its signal line in negative zone. RSI has made several attempts to cross above its 50% level, but slipped down each time. Slow stochastic received support from the edge of its oversold zone, but its upward momentum looks weak.
On longer term weekly chart (not shown), silver’s price is trading well below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones, and moving sideways with downward bias.
S&P 500 Index Chart
The following comment appeared in last week's post on the daily bar chart pattern of S&P 500: "Strong volumes, and the 'death cross' of the 50 day EMA below the 200 day EMA indicate bears are regaining control of the chart."
The index dropped with strong volumes to a 52 week intraday low of 1858 on Fri. Jan 15 '16, but bounced up to close at 1880 - losing 2.1% on a weekly closing basis.
All three EMAs are falling, and the index is trading below them in bear territory. But the fall has been a bit too steep. Daily technical indicators are looking bearish and oversold, which can lead to a technical bounce.
On longer term weekly chart (not shown), the index closed well below its 20 and 50 week EMAs, but nearly 70 points above its rising 200 week EMA. The long-term bull market is still intact. Weekly technical indicators are in bearish zones and showing strong downward momentum.
FTSE 100 Index Chart
The following comment appeared in last week's post on the daily bar chart pattern of FTSE 100: "Daily technical indicators are bearish, and beginning to look oversold. Any technical bounce will probably be used by bears to sell."
FTSE briefly rallied past the 6000 level during the week before succumbing to bear selling. The previous low of 5768, touched on Aug 24 '15, was tested on Fri. Jan 15 '16 but not breached.
The index bounced up to close above the 5800 level, losing 1.8% on a weekly closing basis. At the time of writing this post, the index is trading below the 5800 level after touching a 3 year low of 5766.
All three EMAs are falling, and the index is trading below them in a bear market. Daily technical indicators are again looking oversold. That doesn't mean that the index won't fall lower.
On longer term weekly chart (not shown), the index closed well below its three weekly EMAs in a bear market. The imminent 'death cross' of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market. Weekly technical indicators are in bearish zones and looking oversold.
Plummeting oil price and a crash in the Chinese stock market continues to spook FIIs, who have been on a selling spree across global markets. Already there is talk about a 2008-like bear market - specially from those experts who propound the 8 years market cycle.
As per provisional figures, FIIs were net sellers of equity worth Rs 4300 Crores last week. Their total sales during the first half of the month has crossed Rs 7600 Crores. DIIs were net buyers of equity worth Rs 3900 Crores last week. Their total buying during the first half of Jan '16 was Rs 5350 Crores.
WPI inflation number for Dec '15 was -0.73%, its 14th straight month of contraction. The revised figures for Nov '15 and Oct '15 are -1.99% and -3.7% respectively. Food inflation rose to 8.17% - its steepest rise in 17 months.
BSE Sensex chart pattern
The daily bar chart pattern of Sensex spent a volatile week, oscillating within a range of 630 points near the support level of 24830 (which had provided support to the index in Sep '15 and Dec '15).
The index closed near the lowest point of the week - 375 points below the support level of 24830 - losing about 1.7% on a weekly closing basis. A bearish pattern of 'lower tops and lower bottoms' that got briefly stalled in Dec '15 has resumed.
The index is trading well below its blue downtrend line and its three falling daily EMAs in a bear market. So, is it 'game over' for bulls?
Not quite. All four technical indicators are looking oversold, which can lead to a technical bounce at any time. Also, the fall below the support level of 24830 remains within the 3% 'whipsaw' limit - keeping faint bullish hopes alive.
Whether any technical bounce will be strong enough to reverse the 10 months long downtrend is a moot point. Sensex is still trading 950 points above its 200 week EMA in a long-term bull market.
NSE Nifty 50 chart pattern
The weekly bar chart pattern of Nifty dropped and closed 100 points below the support level of 7540, losing 2.1% on a weekly closing basis. The index has resumed its bearish pattern of 'lower tops and lower bottoms'.
Nifty is trading below its blue downtrend line and its two falling weekly EMAs in a bear market. The 50 week EMA is forming a bearish 'rounding top' pattern.
Weekly technical indicators are in bearish zones and showing downward momentum, hinting at a continuation of the correction. However, all four indicators are beginning to look oversold, which could lead to a technical bounce.
The breadth indicator TRIN (not shown) is rising inside its oversold zone - indicating that a counter-trend move may be around the corner. It is unlikely that such a move will lead to a change of trend because of the bearish mood of FIIs.
Bottomline? Chart patterns of Sensex and Nifty have breached long-term support levels, leaving the door open for deeper corrections. Long-term bull markets are still intact, as both indices are trading above their rising 200 week EMAs (not shown). Use the dip to accumulate slowly. You don't need to be greedy just because others are fearful.
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Sugar stocks are not really my cup of tea - though I do add a spoonful of sugar to my evening cuppa.
The sugar business is cyclical and weather dependent. To make matters worse, policies and prices are subject to frequent interference by the government.
That makes the business unpredictable, and I stay far away from it. But a young, risk-taking trader interested in making quick gains may find sugar stocks attractive.
The 2 years closing chart pattern of Balarampur Chini clearly reflects the cyclical nature of the sugar business. How cyclical? A look at the net profit figures of the past 5 years should suffice.
For year ending Mar '11 and Mar '13, net profit crossed Rs 160 Crores. For year ending Mar '12 and Mar '14, net profit was Rs 6.6 Crores and Rs 3.6 Crores respectively. For year ending Mar '15, there was a net loss of Rs 58 Crores.
Debt/Equity ratio is 1.43. High interest expenses continue to affect the bottom line. In other words, fundamentals do not warrant long-term investment.
But have a look at the returns that a trader could have made. From a low of 36.80 touched on Jan 31 '14 to a high of 85.15 touched on Jun 23 '14, the stock gave 130% return in less than 6 months.
A 15 months long bear phase followed (marked by the blue down trend line). The stock dropped to a closing low of 38.90 on Jun 16 '15 - giving up almost all its gain in one year, but providing good trading opportunities.
After forming a 'double bottom' reversal pattern (marked B1 and B2), the stock price embarked on another bull rally, touching a 2 years high of 87.85 on Jan 13 '16 - giving 120% return in less than 5 months from the low of 39.60 (B2) touched on Aug 31 '15.
The stock is trading well above its rising 200 day EMA in a bull market, but such a sharp rally is unsustainable.
All four daily technical indicators are looking overbought and a couple of them are showing negative divergences by failing to touch new highs with the stock price.
Get ready for another stomach-churning roller coaster ride. Like I said, not really my cup of tea.
The Indian economy seems to be taking one step forward and two steps back. Domestic passenger car sales during Dec '15 grew almost 13% YoY - its 14th straight month of growth. Sales of M&HCVs grew 19%, but two-wheeler sales declined 3%.
However, IIP showed degrowth of 3.2% in Nov '15 YoY - its worst show in 4 years - against a revised 9.9% growth in Oct '15. CPI inflation inched up to 5.61% in Dec '15 YoY against 5.41% in Nov '15. Further interest rate cuts by RBI is unlikely any time soon.
This week, FII net selling in equities has crossed Rs 1930 Crores. DIIs were net buyers of Rs 1660 Crores, as per provisional figures. Month-to-date in Jan '16, FII net selling has crossed Rs 5200 Crores, while DII buying has touched Rs 3100 Crores.
The long-term closing chart pattern of Nifty 50 may be forming a 'rounding top' reversal pattern (more clearly visible on the 200 day EMA). Bulls have so far managed to defend the long-term support level of 7550 - despite a day's close below it on Tue. Jan 12 '15.
Today's price recovery late in the trading day, with strong volume support, may have brought some temporary respite for bulls. On the daily bar chart pattern of Nifty below, a 'reversal day' pattern (lower low, higher close) has formed. That may end the intermediate downtrend - like it did exactly a month ago.
Candlestick pattern experts (not me) may identify today's price bar as a 'dragonfly doji' or a 'hammer', both of which have bullish implications when formed at the end of a down move.
The importance and significance of the 7550 level was explained in last week's update. Lower support levels in case of a convincing breach of 7550 were also mentioned in last week's update.
Note that 7550 did get breached on a closing basis yesterday (Jan 12 '15). But it wasn't a 'convincing breach'. Why? Because of the 3% 'whipsaw' rule. What is that?
It is a simple rule that differentiates a token breach from a convincing one. A convincing breach - particularly of a long-term support (or resistance) level - requires a close beyond 3% of the actual support (or resistance) level.
In this case, a convincing breach would require Nifty to close below 7323 (i.e. 7550 - 3% of 7550). That gives bulls another 225 odd points to play with.
There is no guarantee that FIIs will stop selling - though their net selling today was overshadowed by DII buying. So, Nifty may very well close below 7323 and fall even further.
Daily technical indicators - which look oversold - are showing some signs of upward momentum. It will require considerable buying support to break the bear stranglehold on Nifty's chart.
So, are you getting paralysed by fear, or getting ready to jump into the market feet first? Do neither. Remain circumspect, but maintain your SIPs and/or accumulate good stocks with suitable stop-losses.
As I have been harping for a while, the long-term bull market is intact.
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WTI Crude chart
The daily bar chart pattern of WTI Crude oil briefly rallied past the resistance of its falling 20 day EMA and the 38 level on the first trading day of 2016 - only to form a 'reversal day' pattern (higher high, lower close).
Renewed bear onslaught dropped oil's price to a 12 year low below the 31 level intraday on Jan 11 '16. Strong volumes indicate total bear dominance.
Daily technical indicators are showing downward momentum and looking oversold. Note that MACD and Slow stochastic are showing positive divergences by touching higher bottoms while oil's price dropped lower.
A technical bounce is likely - but there is still no sign of a bottom formation. That means even lower levels are possible - specially if fears of slower offtake from China continue.
On longer term weekly chart (not shown), oil’s price is trading well below its three weekly EMAs in a long-term bear market. Weekly technical indicators are looking oversold, but showing positive divergences by not falling lower than their Aug '15 lows.
Brent Crude chart
The following comments appeared in the previous post on the daily bar chart pattern of Brent Crude oil: "The fall during the past 2 months has been quite sharp. A technical bounce is a possibility."
On Jan 4 '16 - the first trading day of the year - oil's price rallied briefly with good volume support to overcome resistances from the 38 level and its falling 20 day EMA.
Bears pounced immediately - using global worries about an economic slowdown in China as an excuse. Oil's price dropped to a 12 year low below the 32 level, and stayed there.
All three technical indicators are looking oversold and showing downward momentum - but also showing positive divergences by not falling below their Dec '15 lows.
Any technical bounce may induce more selling by bears. At some point, OPEC will be forced to cut back on production. Only then can oil's price reverse the prolonged downtrend.
On longer term weekly chart (not shown), oil's price is trading well below its three weekly EMAs in a long-term bear market. Weekly technical indicators are inside their oversold zones and showing downward momentum.
S&P 500 Index Chart
The following comment was made in last week's post on the daily bar chart pattern of S&P 500: "The index may once again fall down into bear territory - below its three daily EMAs."
So it did - and how?! The index dropped like a stone below the 1920 level and just managed to close above it - losing 120 points (almost 6%) on a weekly closing basis.
It was the worst start in the first trading week of a calendar year for many years. Strong volumes, and the 'death cross' of the 50 day EMA below the 200 day EMA indicate bears are regaining control of the chart.
Daily technical indicators are bearish and showing downward momentum, but looking oversold. Some more correction is possible. Any technical bounce may be used by bears to sell again.
On longer term weekly chart (not shown), the index closed well below its 20 and 50 week EMAs, but more than 100 points above its rising 200 week EMA in a long-term bull market. Weekly technical indicators have entered bearish zones and showing downward momentum.
FTSE 100 Index Chart
Readers were adequately warned in last week's post on the daily bar chart pattern of FTSE 100: "The index is expected to fall down below its 50 day and 20 day EMAs."
The fall was sharp, and backed by heavy volumes (not shown). The index dropped briefly below the 5900 level before closing just above it - losing 330 points (more than 5%) on a weekly closing basis.
The index is once again trading below its three falling EMAs in a bear market.
Daily technical indicators are bearish, and beginning to look oversold. Any technical bounce will probably be used by bears to sell.
On longer term weekly chart (not shown), the index closed well below all three weekly EMAs in a long-term bear market. The 50 week EMA is hurtling down towards the 200 week EMA. Weekly technical indicators are in bearish zones and showing downward momentum.
