Nifty chart: a midweek technical update (Jun 14 ‘17)

FIIs have turned net sellers of equity again. Their total net selling during the first three days of the trading week was worth Rs 6.4 Billion. DIIs were net buyers of equity worth Rs 3.1 Billion, as per provisional figures. Nifty has corrected about 1.3% from its Jun 6 top of 9709.

India's CPI inflation dipped to a record low of 2.18% in May '17 against 2.99% in Apr '17, mainly due to lower food prices. RBI will now be under pressure to reduce the repo and reverse repo rates.

The IIP number for Apr '17 slipped to 3.1% against the revised figure of 3.75% for Mar '17. The manufacturing sector, which constitutes more than 77% of the index, grew only 2.6% in Apr '17 against 5.4% in Apr '16.

The following comments were made in the previous mid-week update on the daily bar chart pattern of Nifty: 

"The rally from the Dec 26 '16 low features several corrective moves towards the rising 20 day EMA that has kept the chart technically 'healthy'. Another correction towards the 20 day EMA will provide Nifty the technical strength to move convincingly above 9700."

Nifty's corrective move from the Jun 6 top of 9709 is now testing support from the 20 day EMA. Will the support hold - as it has done for the past 6 months?

There is no reason why not. Despite FII selling this week, the index has managed to cling on to the 9600 level on a closing basis.

However, if FIIs continue with their selling, a fall towards 9500 can't be ruled out. The index is trading above its three EMAs in a bull market. The dip is providing an adding opportunity.

Daily technical indicators are in bullish zones, but looking a bit bearish. MACD has formed a 'rounding top' reversal pattern and crossed below its signal line in bullish zone. RSI is moving sideways in bullish zone after falling from its overbought zone. Slow stochastic has fallen sharply from its overbought zone.

Nifty's TTM P/E has slipped a little to 24.29, still much above its long-term average. The breadth indicator NSE TRIN (not shown) has nose-dived into its overbought zone - limiting index upside.

Stay invested, and continue with planned SIPs. Avoid any impulsive buying near a market top.

WTI and Brent Crude Oil charts: bears clearly on top

WTI Crude Oil chart

The following remarks appeared in the previous post on the daily bar chart pattern of WTI Crude Oil: "Since the beginning of the year, oil's price has formed a bearish pattern of 'lower tops, lower bottoms'. Till that pattern gets reversed, expect bears to sell on every rise."

Bears took charge and pushed oil's price down to 45. Bulls may feel relieved that the May low of 43.75 was not breached. Bears will point out that the 50 day EMA has crossed below the 200 day EMA - the 'death cross' that technically confirms a return to a bear market.

Daily technical indicators are looking oversold and triggered a technical bounce on Monday (Jun 12). The bounce was aided by inventory declines in US and news that Saudi Arabia will limit supplies to some Asian buyers and deepen supply cuts to USA.

Strong volumes on recent down days show that bears are in no mood to relinquish control.

On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in a long-term bear market. Weekly technical indicators are in bearish zones and showing downward momentum.

Brent Crude Oil chart

The daily bar chart pattern of Brent Crude Oil shows bears are very much on top. Oil's price dropped to 47.50 before bouncing up a bit. 

The imminent 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a return to a bear market.

A fall below the May '17 low of 46.50 will keep the bearish pattern of 'lower tops, lower bottoms' intact.

Oversold technical indicators may encourage bulls to turn Monday's (Jun 12) technical bounce into a pullback rally. Note that Slow stochastic is showing negative divergence by falling lower.

Expect bears to keep selling on every rise.

On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in a long-term bear market. Strong volumes on recent down weeks may lead to a re-test of the Jan '16 low. Weekly technical indicators are looking bearish.

S&P 500 and FTSE 100 charts (Jun 09 '17): bears flex their muscles

S&P 500 index chart pattern

The following remark appeared in last week's post on the daily bar chart pattern of S&P 500: "Some consolidation, and a correction towards 2420 are possibilities."

The index consolidated within a 15 points range (2425-2440) during the first four days of the trading week. 

On Fri. Jun 9, the index touched a new high of 2446, dropped below 2420 to seek support from its rising 20 day EMA, only to bounce up and close at 2432 - losing 7 points on a weekly closing basis.

Friday's trading formed a 'spinning top' candlestick pattern which indicates indecision among bulls and bears. When formed at an index top, it has the potential to reverse the up trend.

Daily technical indicators are in bullish zones, but not showing any upward momentum. All three are showing negative divergences by failing to touch new highs with the index.

The index is trading above its three rising EMAs in a bull market. Bulls are using dips to buy. Some more consolidation and/or correction can't be ruled out. Stay invested, but maintain a trailing stop-loss.

On longer term weekly chart (not shown), the index formed a 'reversal week' bar (higher high, lower close) accompanied by strong volumes, but closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs with the index.

FTSE 100 index chart pattern

The following remarks appeared in last week's post on the daily bar chart pattern of FTSE 100: "The index continued to trade within a bearish 'rising wedge' pattern. A downward breakout from the pattern - towards the rising 20 day EMA - is likely."

On Mon. Jun 5, the index dropped and closed below the 'rising wedge' pattern. On Wed. Jun 7, a pullback to wards the lower edge of the 'wedge' provided another selling opportunity to bears. The index closed exactly at its 20 day EMA.

On Thu. Jun 8, the index dropped below its 20 day EMA and closed lower at 7450, but on Fri. Jun 9, it bounced up to close at 7527 - losing about 20 points for the week. 

(At the time of writing this post, the index tested support from its 20 day EMA and is trading just below 7500.)

Daily technical indicators are looking bearish. MACD has crossed below its signal line (which has formed a 'rounding top' reversal pattern). RSI bounced up from its 50% level but is moving down again. Slow stochastic is falling below its 50% level.

Expect some more consolidation and/or correction. 

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

Sensex, Nifty charts (Jun 09, 2017): pause after touching new highs again

FIIs and DIIs were net buyers of equity during the week, as per provisional figures. FII net buying was worth Rs 6 Billion, which included net selling worth Rs 1 Billion on Fri. Jun 9. DII net buying was worth Rs 8.8 Billion.

Both indices closed flat for the week. The Sensex closed marginally lower. Nifty closed slightly higher. On weekly charts, 'doji' candlestick patterns got formed, which indicate indecision among bulls and bears.

According to RBI, India's forex reserves surged by $2.4 Billion to reach a life-time high of $381.2 Billion in the week ending June 2 on account of rise in foreign currency assets. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched a new high of 31430 on Tue. Jun 6, but formed a 'reversal day' bar (higher high, lower close) that triggered a corrective move towards 'fan line 3'.

It is important that the index receives support from 'fan line 3' if the correction continues. In case 'fan line 3' is breached, a deeper correction towards 30000 may ensue.

Daily technical indicators are in the process of correcting overbought conditions. MACD has formed a 'rounding top' reversal pattern and is about to cross below its signal line. 

ROC has crossed below its 10 day MA and is falling rapidly towards its neutral zone. RSI and Slow stochastic have dropped to the edge of their respective overbought zones.

All three EMAs are rising, and Sensex is trading above them in a bull market. The correction will improve the technical 'health' of the chart, enabling it to rise higher.

A further dip can be used to add to existing positions. Stay invested.

NSE Nifty index chart pattern

For the 7th week in a row, the weekly bar chart pattern of Nifty touched a new high (9709) but closed just 15 points higher on a weekly closing basis - forming a 'doji' candlestick pattern that has the potential of reversing the up trend.

The two weekly EMAs are rising, and the index is trading well above them in a bull market. However, lower volumes during the week indicate bulls are getting a bit weary.

Weekly technical indicators are looking overbought - as they have done for almost 4 months. ROC and RSI are showing negative divergences by failing to touch new highs with the index.

Nifty's TTM P/E is at 24.38 - slightly lower than last week but much higher than its long-term average. The breadth indicator NSE TRIN has dropped sharply from its oversold zone - hinting at some more upside.

Bottomline? Sensex and Nifty charts touched new highs again. Both indices may consolidate or correct a bit before resuming their up moves. Foreign investors are pouring money into emerging market bond funds, as per Wall Street Journal. Stay invested, but maintain a trailing stop-loss.

Emerging Market ETFs Rising

International stocks and their corresponding ETFs in both developed and emerging markets are crushing their U.S. counterparts this year.

Year-to-date, the widely followed MSCI EAFE Index and the MSCI Emerging Markets Index are up 19.1% and 15.8%, respectively. The S&P 500 is higher by “just” 9.6%. Predictably, this is prompting investors to pour billions of dollars of capital into international ETFs.

Read more: http://www.investopedia.com/news/emerging-market-etfs-rising-remember-differences-vwo-eem/

Technical updates – Maharashtra Seamless and Ratnamani Metals

The global economic slowdown - particularly in China - had severely affected the metals sector. Prices plummeted due to lower demand. Stocks of steel and aluminium companies were hit hard. Stocks of metal pipes and tubes sector also suffered badly. 

But with the government beginning to open its purse strings for infrastructure projects and removing hurdles for stuck projects, things are beginning to look up for the metals sector.

The 3 year closing charts of Maharashtra Seamless and Ratnamani Metals clearly show that all the losses during their respective bear phases have been recovered. Both stocks are poised to rise to new highs.

Maharashtra Seamless

The stock had closed at a high of 358 on Sep 9 '14, but formed a 'triple top' reversal pattern during Aug-Sep '14 that triggered a bear phase that lasted almost 18 months. 

The stock closed at a low of 132 on Feb 29 '16. Note that all four technical indicators showed positive divergences by touching higher lows inside their oversold zones.

A sharp price spike on Apr 4 '16 took the stock above its three EMAs into bull territory. The subsequent rally received good support from the 200 day EMA. The previous top of 358 was touched on Mar 6 '17, but the stock formed a 'double top' reversal pattern by touching 357 on Apr 5 '17.

A bull market correction/consolidation is under way. The company declared decent Q4 (Mar '17) numbers but for FY 16-17, top line and bottom line were lower by 17% and 5% respectively. Valuation looks a bit high.

Ratnamani Metals

The stock had closed at a high of 783 on Mar 3 '15 before dropping into a bear phase that ended almost a year later when the stock closed at a low of 404 on Feb 19 '16.

Oversold technical indicators and positive divergences on RSI and Slow stochastic triggered a rally that took the stock to a new high of 811 on May 3 '17. Disappointing Q4 (Mar '17) results led to a sharp sell off.

The stock dropped below its 20 day and 50 day EMAs to a low of 705 on May 23 '17. Oversold technical indicators have initiated a partial price recovery. For FY 16-17, top line grew by 17.5% and bottom line by 6.1%.

Valuation is on the expensive side. Another dip towards the 200 day EMA may provide a better entry opportunity.

Nifty chart: a midweek technical update (Jun 07 ‘17)

FIIs were net buyers of equity on all three days of trading this week. Their total net buying was worth Rs 6.1 Billion. 

DIIs were net sellers of equity worth Rs 3.6 Billion on Tue, but were net buyers worth Rs 1.8 Billion on Mon. and Wed. as per provisional figures.

RBI's monetary policy announcement today came as no surprise. Status quo was maintained for repo and reverse repo rates. CRR was also unchanged, but SLR was reduced by 50 bps (0.5%) to 20%.

The daily bar chart pattern of Nifty rose to touch a new high of 9709 on Tue. Jun 6, but closed near the low point of the day at 9637 - forming a 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

All three EMAs are rising, and the index is trading above them in a bull market. However, overbought technical indicators that are showing negative divergences by failing to touch new highs with the index may be triggering a correction.

The rally from the Dec 26 '16 low features several corrective moves towards the rising 20 day EMA that has kept the chart technically 'healthy'. Another correction towards the 20 day EMA will provide Nifty the technical strength to move convincingly above 9700.

Nifty's TTM P/E is at 24.48, which is well above its long-term average. The breadth indicator NSE TRIN (not shown) has reversed direction from the edge of its oversold zone and dropped sharply into neutral zone - hinting at some more index upside.

With FIIs turning buyers again, any correction is likely to be a shallow one. 

The Indian Meteorological Dept has reconfirmed a normal monsoon this year. That should give a boost to rural consumption. 

Implementation of GST from July 1 should benefit the economy over the long term, but there may be a temporary slowdown due to teething problems. SME companies may not be ready yet with their systems and processes.

Stay invested, and think long-term.