Sensex, Nifty charts (Dec 11, 2020): soaring high with no bearish clouds in sight

FIIs relentlessly continued with their buying momentum during the week. They were net buyers of equity worth a huge Rs 167.21 Billion. DIIs couldn't quite match them. They were net sellers of equity worth Rs 125.35 Billion. Sensex gained 2.2% and Nifty gained 1.9% on a weekly closing basis.

Automobile sales during Nov '20 were a mixed bag - showing 9% YoY growth over Nov '19 but a 14% MoM degrowth over Oct '20. Maruti, Ford, Renault, Nissan, Skoda, VW showed degrowth. M&M, Hyundai, Kia, Tata Motors, Honda, MG showed decent growth.

Registering growth for the second straight month, India's IIP (Index of Industrial Production) rose to an eight months high of 3.6% in Oct '20 on the back of recovery in manufacturing, consumer goods and power sectors.  

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched new intra-day (46310) and closing (46103) highs during the week. FIIs ignored stretched index valuation, and remained huge buyers in the Indian stock market.

Sensex has been rising within an eight months long upward-sloping channel, and is trading well above its three rising EMAs in a long-term bull market. Since the index is testing the upper edge of the trading channel, there is a possibility of some correction or consolidation.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways after merging with its signal line. ROC is moving sideways above its 10 day MA. RSI has re-entered its overbought zone. Slow stochastic is moving sideways inside its overbought zone. 

A 25% rise in corporate profits during Q2 (Jul-Sep '20) amid a sharp contraction in GDP was on the back of wage squeezes leading to rise in income inequalities in India, as per economist Nouriel Roubini. 

This rising inequality is dangerous politically and socially because only a few people in the economy are benefitting. The groundswell of support for the farmers' agitation is a manifestation of the 'rich getting richer while the poor are getting poorer' situation.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose for the sixth straight week to close at a new high of 13514. Huge buying by FIIs is propelling the index higher into blue-sky territory with no known resistances. 

The index has been rising within an upward-sloping channel for more than 8 months, and is trading well above its three rising weekly EMAs in a long-term bull market. The strong rally has been sustained by FII buying thus far, but the possibility of year-end profit booking should be kept in mind.

Weekly technical indicators are inside their respective overbought zones. MACD is rising above its signal line. ROC is moving sideways above its 10 week MA. RSI is rising. Slow stochastic is moving sideways. 

After touching a new high of 37.2 on Wed. Dec 9, Nifty's TTM P/E slipped a bit to 37.16 - which is far above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped deep inside its overbought zone. Some near-term index consolidation or correction is possible.

Bottomline? Sensex and Nifty charts are rising to new highs on the back of relentless buying by FIIs. Year-end profit booking by foreign fund houses can't be ruled out. Hold existing positions with trailing stop-losses.  

Sensex, Nifty charts (Apr 26, 2019): bears hanging on for dear life

FIIs were net buyers of equity on Mon., Wed. and Thu. (Apr 22, 24 and 25), but net sellers on the other two days. Their total net buying was worth Rs 45.2 Billion. DIIs were net buyers of equity on Tue. and Fri. (Apr 23 and 26) but net sellers on the other three days. Their total net selling was worth Rs 36.8 Billion, as per provisional figures.

Five years after launch, the Jan Dhan Yojana scheme has achieved a total balance of nearly Rs 1 Trillion. The scheme got a boost from demonetisation in Nov '16, and gained rapid pace in the last 6 months - leading to scepticism on the possible link between elections and spurt in balances. 

A dark storm cloud (read: rising oil prices) has gathered over the Indian stock market. Prices in petrol pumps have not been revised upwards in proportion to the rise in international oil prices due to the ongoing election. After May 23, that cloud is going to burst upon Indian consumers.

BSE Sensex index chart pattern

The following remark appeared in last week's post on the daily bar chart pattern of Sensex: "Some more consolidation near the upper edge of the trading channel, and/or a drop towards the rising 20 day EMA are possibilities."

Sometimes, the index does exactly what you expect it to do. Despite the volatility and the alternate days of sharp rise followed by equally sharp fall, all that Sensex managed was a sideways consolidation that faced resistance from the upper edge of the trading channel and received support from the 20 day EMA.

The entire trading during the month of Apr '19 has occurred within a small 'diamond' pattern, which can be a trend reversal pattern at a market top. However, a 'diamond' can also act as a continuation pattern. So, it is better to wait for the eventual breakout before taking any buy/sell decision.

A 'diamond' pattern has measuring implications. The height of the 'diamond' - about 1200 points - will be the downward or upward target from the eventual breakout point. (For a possible downward breakout, the long-term support level of 37690 - marked by blue dotted line - can come into the picture.)

Daily technical indicators are giving conflicting signals. MACD is falling below its signal line in bullish zone. ROC has crossed above its 10 day MA to enter bullish zone. RSI and Slow stochastic are at their respective neutral zones.

All four technical indicators showed negative divergences by failing to touch new highs when the index touched its lifetime high of 39487 on Apr 18. That is usually an advance warning of a possible change in trend.

FIIs are on a buying spree. A flood of liquidity can throw bearish technical signals out the window. But note that they were net sellers on two days during the week. 

Near a lifetime index high, discretion should be the better part of valour. Sensex is trading at a P/E of 29.5 - well above its long-term average. The downside risk is increasing by the day.

NSE Nifty index chart pattern

There is good (bullish) news and bad (bearish) news visible on the weekly bar chart pattern of Nifty. First, the good news: the index closed above the upward-sloping trading channel at a new lifetime high closing level of 11755.

Now, the bad news: For the second week in a row, the index failed to close above its Aug '18 top of 11760. Also, the index has formed a weekly 'hanging man' candlestick that usually has bearish implications.

Weekly technical indicators are looking bullish and overbought. MACD and ROC are rising inside their respective overbought zones. RSI and Slow stochastic are moving sideways inside their respective overbought zones - showing negative divergences by failing to touch new highs with the index.

Remember that an index can remain overbought for long periods. However, the two previous occasions when all four technical indicators were inside their overbought zones - in Jan '18 and Aug '18 - sharp corrections had followed.

History may not repeat itself - but many small investors are doomed by repeating their mistakes of becoming too bullish at a market top. 

Nifty's TTM P/E has moved up to 29.34, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone. Some more consolidation or correction is possible.

Bottomline? Sensex and Nifty charts are still hovering near the upper edges of their respective upward-sloping trading channels, and can consolidate or correct some more  before moving up further. Stay invested, but control any impulse to buy big.

Sensex, Nifty charts (Apr 18, 2019): all over for the bears, bar the shouting

In a week with two holidays, FIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 27.9 Billion. DIIs were net buyers of equity on Mon. and Tue. (Apr 15 and 16) but net sellers on Thu. Apr 18. Their total net buying was worth Rs 2.8 Billion, as per provisional figures.

The Wholesale Price Index (WPI) based inflation rose for the second consecutive month to 3.18% in Mar '19, against 2.93% in Feb '19 and 2.74% in Mar '18 - due to higher vegetable prices and rise in the 'fuel and power' category.

During FY 2018-19, India's exports and imports grew ~9% to US $331 Billion and US $507.4 Billion respectively. The trade deficit widened to $176.4 Billion against $162 Billion in FY 2017-18. However, for the month of Mar '19, the trade deficit narrowed to US $10.9 billion compared to US $13.5 Billion in Mar '18.  

BSE Sensex index chart pattern

The following comment was made in the previous post on the daily bar chart pattern of Sensex: "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." 

The expected upward breakout from the 'falling wedge' occurred on Mon. Apr 15, followed by a breakout above the upward-sloping trading channel on Apr 16 - on the back of combined buying by FIIs and DIIs.

Bulls seemed to be in complete control when the index touched a new intra-day high of 39487 on Thu. Apr 18. However, profit booking ensued before a long weekend. The index formed a 'reversal day' bar (higher high, lower close) and pulled back to the top of the trading channel.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is below its falling signal line. ROC has bounced up a bit after receiving support from its neutral zone, but is below its falling 10 day MA. RSI has dropped down after facing resistance from the edge of its overbought zone. Slow stochastic's rise towards its overbought zone has stalled.

All four technical indicators are showing negative divergences by failing to touch new highs with the index. Some more consolidation near the upper edge of the trading channel, and/or a drop towards the rising 20 day EMA are possibilities.

Some uncertainty appears to be creeping into the market regarding the outcome of ongoing general elections. The lack of euphoria near a lifetime index high can be a bullish sign. However, any upsets in expected election results can change market sentiment to bearish in a hurry. 

NSE Nifty index chart pattern

Note the following comments from the previous post on the weekly bar chart pattern of Nifty: "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."

Right on cue, Nifty rose to touch new intra-week (11856) and closing (11753) highs during a holiday-shortened week, and closed above the trading channel with a 0.9% weekly gain.

Weekly technical indicators are looking bullish and overbought. MACD is above its rising signal line, and has entered its overbought zone. ROC, RSI and Slow stochastic are inside their respective overbought zones, but are showing negative divergences by failing to touch new highs with the index.

Nifty closed well above its weekly EMAs in a bull market. It has so far failed to close above its Aug '18 top of 11760 - which is the last hurdle for bulls to regain complete control of the chart. It is just a matter of time before they do so. 

Nifty's TTM P/E has moved up to 29.33, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, hinting at some more near-term index upside.

Bottomline? Sensex and Nifty charts are hovering near the upper edges of their respective upward-sloping trading channels, and can face some more consolidation or correction before moving up further. Stay invested, keep faith in your asset allocation plan and control any impulse to go 'all in'.

Sensex, Nifty charts (Apr 05, 2019): brief retreats after touching new highs

FIIs were net buyers of equity on Mon., Tue. and Fri. (Apr 1, 2 and 5) but were net sellers on Wed. and Thu. (Apr 3 and 4). Their total net buying was worth Rs 9.7 Billion during the week. DIIs were net buyers of equity on Thu. but net sellers on the other four days. Their total net selling was worth Rs 6.7 Billion, as per provisional figures.

Nikkei India's Services PMI slipped to 52.0 in Mar '19 from 52.5 in Feb '19. It was the slowest growth (a number above 50 indicates growth) since Sep '18. The Composite PMI (Manufacturing + Services) fell to 52.7 in Mar '19 from 53.8 in Feb '19.

After cutting repo and reverse repo rates by 25 bps (0.25%) - acknowledging a slowdown in India's growth momentum - RBI has lowered the GDP growth forecast for FY 2019-20 to 7.2% from the earlier estimate of 7.4%.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex rose to touch a new lifetime high of 39270 on Wed. Apr 3 but formed a 'reversal day' bar (higher high, lower close) that often terminates an intermediate up trend.

After a pullback to the top of the large upward-sloping channel on Wed. Apr 3, the index dropped inside the trading channel on follow-up profit booking by FIIs on Thu. Apr 4. 

The index moved up to the upper edge of the channel on Fri. Apr 5 as FIIs turned net buyers once again, and is trading well above its three rising EMAs in a bull market.

Is the index forming a large 'double top' reversal pattern? It is a bit too early to call. There are two technical 'rules' for confirming a 'double top': (1) lower volumes during formation of the second top; (2) an index fall below the 'valley' point (33292 touched on Oct 26 '18) between the two tops.

Neither of those two 'rules' have been followed so far. A more likely near-term possibility is some profit booking and an index fall towards the 125 points upward 'gap' formed on Mar 12 '19.

Daily technical indicators have corrected overbought conditions. MACD is about to cross below its rising signal line in bullish zone. ROC is facing resistance from its falling 10 day MA in bullish zone. RSI and Slow stochastic have fallen down from their respective overbought zones.

The stock market has 'memory' - because traders remember the level of the previous top from where a sharp correction had started. Psychologically, they tend to book profits when the index is at or near a previous top. 

Therefore, some more correction or consolidation can be expected - specially with results season coinciding with election season. Small investors would do well not to dive into the market now. A SIP approach may work better.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed higher for the 7th week in a row, as FIIs remained net buyers. The index also managed to close above the upward-sloping trading channel for the 2nd straight week.

The breakout above the channel still isn't a convincing one, though the index did touch a new high (by 0.8 points). Follow-up buying from FIIs was weak. Nifty formed a long-legged 'doji' candlestick, which is a sign of indecision among bulls and bears.

An observant analyst posted on twitter that the previous (Aug '18) top was preceded by 8 weeks of a corrective move followed by 23 weeks of rally. The Apr '19 top was also preceded by 8 weeks of sharp correction followed by 23 weeks of rally.

It is one of those interesting coincidences that sometimes happen on price charts, but doesn't have any particular technical significance. The index is trading above its weekly EMAs in a bull market. A big correction may or may not occur - but if it does, it should be used as a buying opportunity.

Weekly technical indicators are looking bullish and overbought. MACD is above its signal line and rising towards its overbought zone. ROC is above its 10 week MA, and is well inside its overbought zone. RSI is moving sideways above the edge of its overbought zone. Slow stochastic well inside its overbought zone, and is also moving sideways.

Nifty's TTM P/E has moved up to 29.12, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone  after rising sharply from its overbought zone. Some index consolidation or correction can be expected.

Bottomline? Sensex and Nifty charts are hovering near the upper edges of their respective upward-sloping trading channels, and may face some consolidation or correction before moving up further. Avail dips to add.

Nifty chart: a midweek technical update (Apr 03, 2019)

FIIs were net buyers of equity on the first two trading days this week, but booked profits today. Their total net buying was worth Rs 4 Billion. DIIs were net sellers of equity on all three days. Their total net selling was worth Rs 15.5 Billion, as per provisional figures.

Nikkei India's Manufacturing PMI eased to a 6-months low of 52.6 in Mar '19 from 54.3 in Feb '19, due to slower increase in new orders, production and employment. (A figure above 50 indicates growth.)

Auto sales in Mar '19 were mixed. However, for FY 2018-19 sales growth was decent. In passenger vehicles, M&M grew 2%; Maruti, Toyota, Honda grew between 2 & 8%; Tata Motors grew 12% (its highest in 6 years). In CVs, Eicher, Ashok Leyland, M&M, Tata Motors grew between 10 & 17%.

Bullish View

Note the following comments from last week's post on the daily bar chart pattern of Nifty: "It should be just a matter of time before the index rises to touch a new high. However, bears are putting up a stiff fight to defend the upper edge of the trading channel. Further upward progress may be slow."

Nifty broke out above the trading channel on Fri. Mar 29, but struggled to rise higher after crossing above 11700 on Mon. & Tue. (Apr 1 & 2). It finally touched a new lifetime high of 11761 today, only to form a 'reversal day' bar (higher high, lower close) and pullback to the top of the channel.

Daily technical indicators are looking bullish and overbought. That doesn't mean there will be an immediate correction, as an index can remain overbought for long periods.

An upward bounce from the top of the channel will provide a buying opportunity.

Bearish View

The last ten trading sessions have formed a bearish 'rising wedge' pattern, from which a downward breakout can be expected. 

Such a downward breakout will drop the index within an upward-sloping trading channel. The index can then correct below its rising 20 day EMA, and fill the 46 points 'gap' formed on Mar 12.

Daily technical indicators are looking overbought. RSI and Slow stochastic are showing negative divergences by touching lower tops while the index rose higher.

Some correction/consolidation is likely, which will improve the technical 'health' of the chart and enable Nifty to climb to the psychological level of 12000.

Nifty's TTM P/E is at 29.06, which is way higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has emerged from its overbought zone and rising rapidly in neutral zone. Some correction or consolidation may follow.

Profit booking at a lifetime high is only to be expected. Whether it will remain a few days of profit booking or turn into a full-fledged correction will depend a lot on FIIs.

It is huge FII buying that propelled the index 1160 points from its Feb 19th low. If they start to sell - as they did today - a correction can ensue. 

Small investors should not get caught up in bullish euphoria. Stick to your SIPs and asset allocation plans, and all will be well.

Sensex, Nifty charts (Mar 29, 2019): poised to touch new highs?

FIIs were net buyers of equity on the first four trading days, but were net sellers on Fri. Mar 29. Their total net buying was worth Rs 61.4 Billion during the week. DIIs were net sellers of equity on Mon., Tue. and Thu. (Mar 25, 26 and 28) but net buyers on the other two days. Their total net selling was worth Rs 4.3 Billion, as per provisional figures.

For the month of Mar '19, FIIs were net buyers of equity worth a massive Rs 323.7 Billion - their highest net buying in a month since Mar '17; DIIs were net sellers of equity worth Rs 139.3 Billion - their highest net selling in a month since Mar '16.

India's Current Account Deficit (CAD), at US $16.9 Billion during Q3 (Oct-Dec '18), widened to 2.5% of GDP from 2.1% a year ago due to a higher trade deficit. 

India's fiscal deficit (gap between expenditure and revenue) from Apr '18 to Feb '19 was Rs 8.51 Trillion - 134.2% of the budgeted amount of Rs 6.34 Trillion for FY 2018-19.

BSE Sensex index chart pattern

After a brief dip towards its rising 20 day EMA on Mon. Mar 25, the daily bar chart pattern of Sensex made another attempt to cross above the upper edge of the upward-sloping trading channel on Fri. Mar 29.

This time, the effort was almost successful. The index closed marginally above the channel, but formed a small 'doji' candlestick - showing indecision among bulls and bears on the last trading day of FY 2018-19.

Daily technical indicators are looking bullish and overbought. MACD is moving sideways above its rising signal line in bullish zone. ROC has crossed below its 10 day MA and dropped from its overbought zone. RSI and Slow stochastic are inside their respective overbought zones.

All four indicators are showing negative divergences by failing to touch higher tops with the index. Sensex is trading well above its three rising EMAs in a bull market. However, a pullback towards the 'gap' zone (between 37106 and 37231) formed on Tue. Mar 12 remains a possibility. 

After inventory pile-up at auto dealerships, there is now news of inventory pile-up at FMCG dealers and reluctance of distributors to stock more. Year-end considerations may be part of the reason, but there are definite signs of rural distress.

Here is an interesting stat: FIIs were net buyers of Indian equity during the month of March every year for the last 10 years. (They were net sellers in Mar '08 and Mar '09.) So, their net buying in Mar '19 is not a surprise - but the amount of buying is.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed higher for the sixth week in a row, on the back of strong FII buying. More importantly, the index managed to close just above the upward-sloping trading channel.

The breakout above the channel isn't a convincing one yet. Follow-up buying is required to propel Nifty to a new lifetime high. That shouldn't pose a problem as long as FIIs remain bullish.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC is above its 10 week MA, and is moving sideways inside its overbought zone. RSI has entered its overbought zone. Slow stochastic well inside its overbought zone.

Nifty's TTM P/E has moved up to 29.01, its highest level during the month and well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped well inside its overbought zone. Some index correction or consolidation can be expected.

Bottomline? Sensex and Nifty charts are just above the upper edges of their respective upward-sloping trading channels, and may face some correction or consolidation before moving up to touch new lifetime highs. Use dips to add.

Nifty chart: a midweek technical update (Mar 27, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 26.3 Billion. DIIs were net sellers of equity on Mon. & Tue. (Mar 25 & 26) but net buyers today. Their total net selling was worth Rs 0.74 Billion, as per provisional figures.

According to ICRA, Indian basmati rice exports may touch an all-time high of Rs 300 Billion in FY 2018-19, on the back of strong demand from Iran and firming up of prices. The previous highest export figure was Rs 293 Billion in FY 2013-14.

A consortium of Tata Group, GIC (Singapore's sovereign wealth fund) and SSG Capital Management will invest Rs 80 Billion to buy a stake in GMR Airports Ltd, which is a unit of GMR Infrastructure Ltd. GMR operates airports at Hyderabad, Delhi, Cebu (Philippines), and is building airports at Goa and Crete (Greece).

Note the following comments from the previous technical update on the daily bar chart pattern of Nifty: "The index is just 400 points away from its lifetime high. Charts tend to have 'memory'. Profit booking can emerge as the index approaches 11760."

The index had touched an intra-day high of 11573 on Fri. Mar 22 - moving above the upper edge of the upward-sloping trading channel. It closed 116 points lower due to profit booking, and formed a bearish 'reversal day' bar (higher high, lower close).

Nifty opened with a downward 'gap' and touched an intra-day low of 11311, as profit booking continued when trading resumed on Mon. Mar 25. A pullback towards the upper edge of the trading channel during the next two days touched a lower top of 11546 today.

The index closed 101 points lower to form another 'reversal day' bar (higher high, lower close) even though FIIs and DIIs were both net buyers today. A fall to test support from the 46 points upward 'gap' formed on Mar 12 is a possibility.

Daily technical indicators are correcting overbought conditions. MACD is falling towards its rising signal line inside its overbought zone. RSI and Slow stochastic have slipped down from their respective overbought zones - hinting at some more correction.

All three EMAs are rising, and Nifty is trading above them in a bull market. It should be just a matter of time before the index rises to touch a new high. However, bears are putting up a stiff fight to defend the upper edge of the trading channel. Further upward progress may be slow.

Nifty's TTM P/E is at 28.05, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has received support at the edge of its overbought zone. Some consolidation or correction may follow.

On a longer-term weekly line chart (not shown), Nifty may be forming a large 'head and shoulders' reversal pattern, with a neckline at 10000. Such a pattern will get technically confirmed only if the index falls below 10000. A move above the lifetime high of 11760 - touched in Aug '18 - will negate the pattern.

If FIIs keep buying, a fall below 10000 will remain a distant dream. However, it is prudent to respect a large reversal pattern - till the pattern gets negated.

Sensex, Nifty charts (Mar 15, 2019): flood of FII money washes away all resistances

FIIs are on a buying spree. Their total net buying was worth a massive Rs 148.2 Billion during the week. DIIs were net sellers on all five trading days. Their total net selling was worth Rs 74.0 Billion, as per provisional figures.

India's WPI based inflation rose to 2.93% in Feb '19 from 2.76% in Jan '19, due to rise in food prices. WPI based inflation was 2.74% in Feb '18.

India's trade deficit narrowed to US $9.6 Billion in Feb '19 from US $14.73 Billion in Jan '19. Merchandise exports grew 2.44% YoY to US $26.67 Billion while imports were down 5.41% to US $36.26 Billion.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex broke out above the Fibonacci resistance zone (refer last week's post) on Mon. Mar 11, and continued to soar higher as a flood of FII inflow fuelled a sharp rally.

The entire trading since the low of 33292 touched on Oct 26 '18 has formed a wide upward-sloping channel. The index faced resistance from the upper edge of the channel on Fri. Mar 15.

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

All three EMAs are rising, and the index is trading well above them in a bull market. However, overbought technical indicators are hinting at a pullback - towards the 'gap' zone (between 37106 and 37231) formed on Tue. Mar 12.

If FIIs continue buying, expect the index to move higher and test the previous (lifetime) top of 38990 touched on Aug 29 '18. 

Some correction from the current level will improve the technical 'health' of the chart, enabling those who missed out on the rally to enter. But corrections won't occur just because we want them to.

FIIs appear convinced that NDA will return to office for a second term. They have turned the stock market into a 'voting machine' and may be 'buying the rumour' only to 'sell on news'. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed convincingly above the Fibonacci resistance zone (refer last week's post) on the back of strong buying by FIIs. It was the fourth straight week of higher close for the index.

The entire trading since the Oct '18 low of 10004.55 has formed a wide upward-sloping channel, which will remain in force till it gets breached. The index is facing resistance from the upper edge of the channel, and can pullback towards 11120.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has crossed above its 10 week MA to enter overbought zone. RSI is poised to enter its overbought zone. Slow stochastic has re-entered its overbought zone, but is showing negative divergence by failing to rise higher with the index. 

Nifty's TTM P/E has moved up to 28.01, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone. Some more near-term index upside is possible.

Bottomline? Sensex and Nifty charts have broken out above their respective Fibonacci resistance zones. Both indices are trading within upward-sloping trading channels, and can be expected to move higher on the back of FII buying. Dips can be used to enter.

Sensex, Nifty charts (Sep 28, 2018): corrective moves approach support zones

FIIs were net buyers of equity on Thu. (Sep 27), but net sellers on the other four days. Their total net selling was worth Rs 37.1 Billion. DIIs were net sellers of equity on Thu. but net buyers on the other four days. Their total net buying was worth a huge Rs 84.4 Billion, as per provisional figures.

Demand for services and manufactured goods slowed in Aug. '18, while a cross-section of high-frequency indicators compiled by Bloomberg News suggest economic growth may moderate in the coming months from an 8%-plus pace in the Apr-Jun '18. 

A recent report by the United Nations Conference on Trade and Development (UNCTAD) stated that trade tariff tussle between USA and China is a symptom of a "deeper malaise". The report added that four BRICS nations, including India, are doing better because of their domestic demands.

BSE Sensex index chart pattern

After the panic selling on Fri. Sep 21, the daily bar chart pattern of Sensex got some respite from bears by consolidating sideways in a range during the week. On Fri. Sep 28, the index slipped 8 points below the low of 35993 touched on Sep 21 - proving the market adage 'Panic bottoms seldom hold'.

Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line in bearish zone. ROC is below its falling 10 day MA in oversold zone. RSI and Slow stochastic have re-entered their respective oversold zones. Any technical bounce may encounter more bear selling.

The support zone mentioned in last week's post - based on 50% and 61.8% Fibonacci retracement levels of the rally from the Mar '18 low and Aug '18 top - has been marked on the chart. The 200 day EMA is inside the support zone. 

Bulls can be expected to put up a fight to defend the support zone. Note that heavy buying by DIIs during the week failed to prevent the index from touching a lower low. That is a clear indication that HNIs and small investors have joined FIIs in rushing through the exit door.

Stay calm and sit on the sidelines. If you have spare savings that you are waiting to invest, wait a little longer. The prudent thing to do would be to buy when the market is on the way up than when it is on the way down.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed lower for the fourth straight week, touching a low of 10850 before bouncing up to close within the downward-sloping trading channel. The index closed below its 20 week EMA for the first time in 6 months.

Nifty closed above its 50 week EMA in long-term bull territory. Any further correction should get support from the zone between 10850 and 10550. In case the index falls below 10550, it can drop to test its Mar '18 low.

Weekly technical indicators have corrected overbought conditions and are showing downward momentum. MACD has crossed below its signal line and has fallen from its overbought zone. ROC has crossed below its 10 week MA and has dropped to its neutral zone. RSI and Slow stochastic have also dropped to their respective neutral zones.

Nifty's TTM P/E has come down to 26.44, but remains above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, and can trigger a pullback.

Bottomline? The corrective downward moves on Sensex and Nifty charts have dropped near strong support zones. Technical bounces are likely, but bears may use them to sell again. Macro headwinds - like rising oil prices, a depreciating Rupee, widening trade and fiscal deficits, ongoing debt woes of IL&FS - remain concerns for bulls. Time to sit on the sidelines and wait for the indices to find bottoms.