Nifty chart: a mid-week update (Dec 31 ‘14)

Nifty ended the previous year at 6304. It gained 1978.70 points to end the current year at 8282.70 – a fairly substantial inflation-beating return of 31.4% – despite a sharp correction during Dec ‘14.

An investor who regularly invested in an index fund or Nifty BeES (1 yr return: 30.94%) would have made similar returns. If your portfolio return was less than 30% during the year, you may reconsider/relearn your stock picking skills (or, take the help of a market expert).

What kind of returns can be expected in 2015? Expecting another 30% year on a higher base may be too optimistic. But with inflation and oil prices moving down, and a majority government - which is not averse to taking tough decisions - in place, a 15-20% gain is in the realm of possibilities.

That would mean a Nifty level in the range between 9500-9900 on Dec 31, 2015.

The zone between 7840 and 8180 (corresponding to Nifty’s Jul ‘14 and Sep ‘14 tops) – marked by blue dotted lines – provided good support to the index during its recent correction.

A rising US Dollar index, and indications of slow growth in China and Europe caused FIIs to book profits – their net selling in equities touching Rs 4400 Crores during Dec ‘14. DII net buying of close to Rs 6000 Crores during the month failed to propel Nifty to a new high.

Daily technical indicators are turning bullish. MACD has moved up to touch its sliding signal line in negative territory. ROC is rising sharply in positive territory above its 10 day MA, which has formed a bullish ‘rounding bottom’ pattern. RSI is moving up towards its 50% level. Slow stochastic has crossed above its 50% level.

Volumes have been on the lower side during this week, but it is gradually rising. Many FIIs are on their year-end break, which may be the reason for low volumes.

Trading activity should pick up from next week – allowing Nifty to resume its upward march. The correction during the month has not deterred the 200 day EMA from continuing its gradual rise. The long-term bull market is alive and well.

(Wishing all blog visitors, blog followers, blog subscribers, newsletter subscribers and twitter followers a peaceful and prosperous 2015.)

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 26, ‘14

S&P 500 Index Chart

In a truncated trading week due to Christmas holiday, volumes were expectedly low. That did not prevent the daily bar chart pattern of S&P 500 to rise to new intra-day and closing highs. All three EMAs are rising and the index is trading above them in a long-term bull market.

The index is coming close to testing resistance from the upward-sloping line of the bearish ‘broadening top’ pattern. A convincing move above the pattern will allow bulls to regain total control.

However, bears may use the opportunity to initiate another sharp correction. Note that two of the three daily indicators – MACD and RSI – failed to touch new highs with the index. The negative divergences is a warning sign for bulls.

On longer term weekly chart (not shown), the index is trading well above its three weekly EMAs in a long-term bull market. But all three weekly technical indicators are showing negative divergences by failing to touch new highs with the index. Brace yourself for a roller-coaster ride.

FTSE 100 Index Chart

In a holiday-shortened trading week, the daily bar chart pattern of FTSE 100 crossed above its 50 day EMA and the 6600 level, but faced strong resistance from its 200 day EMA. Failure to re-enter bull territory may encourage bears to mount another attack.

Daily technical indicators have corrected oversold conditions, but haven’t quite turned bullish yet. MACD is rising above its signal line in negative territory. RSI is moving up towards its 50% level, but its upward momentum is slowing down. Slow stochastic is looking bullish by rising sharply above its 50% level.

Can the index return to bull territory in a convincing manner and show some gains for the year? Bears will try their best not to let that happen.

On longer term weekly chart (not shown), the index is trading well above its 200 week EMA in a long-term bull market, but faced strong resistance from its entangled 20 week and 50 week EMAs. Weekly technical indicators are looking bearish.

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 26, 2014

Activity was comparatively low in F&O expiry week that was shortened by Christmas holiday. Both Sensex and Nifty flattered to deceive – their gains during the earlier part of the week getting wiped out by the end.

FIIs net sold equities worth Rs 3500 Crores. DIIs were net buyers of Rs 1830 Crores. Strong US GDP number and rising Dollar index motivated FIIs to book profits. Both indices showed some resilience by falling marginally.

The President signed ordinances to increase foreign equity in insurance (from 26% to 49%) and to initiate auction for reallocation of coal blocks. The respective legislations were held up in the Rajya Sabha by opposition parties during the recent winter session of parliament.

The Government adopted the ordinance route to send a strong message that needed reforms can not be held hostage by petty politics.

BSE Sensex index chart

The daily bar chart pattern of Sensex moved briefly above its 20 day and 50 day EMAs during the early part of the week, but dropped below both EMAs into the support zone between 26300 and 27350 by the end of the week.

Technical indicators have corrected oversold conditions, but remain in bearish zones. MACD is sliding below its falling signal line in negative territory. ROC crossed above its 10 day MA, but failed to enter positive zone. RSI emerged from its oversold zone, but has dropped down. Slow stochastic failed to rise above its 50% level, and is slipping down.

Some more consolidation is likely. Several good stocks have corrected from their recent highs – giving entry opportunities.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty briefly dropped inside the support zone between 7840 and 8180 (marked by blue dotted lines), but received good support from its 20 week EMA and closed just above the support zone.

Weekly technical indicators have corrected overbought conditions, but remain in bullish zones. MACD has crossed below its signal line, and dropped from its overbought zone. ROC has crossed above its 10 week MA in positive zone. RSI is sliding down towards its 50% level. Slow stochastic is falling rapidly towards its 50% level.

Expect some more consolidation before Nifty resumes its up move. The index is trading above both its weekly EMAs in a long-term bull market. The dip provided an entry opportunity.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are recovering from sharp bull market corrections. Long-term up trends are intact. Both indices should resume the next legs of their bull rallies after some consolidation.

Hope of better days – a guest post

The recently concluded winter session of Parliament was marked by controversies and obstructive demonstrations by opposition parties. Lok Sabha, with its BJP majority, was in session for almost 100% of its schedule – one of its best performances in several years.

Not so for the Rajya Sabha where BJP was in a minority. Several sessions were abandoned on some pretext or the other due to virulent attacks by the opposition parties. BJP got a taste of its own medicine. They had noisily obstructed parliament proceedings during the previous regime.

What about Narendra Modi’s poll promise of ‘acche din’? With important bills getting stuck, there is talk of the government resorting to the ordinance route to move ahead with its reform agenda. In this month’s guest post, Nishit takes a realistic look at the prospect of better days for the country, and the stock market.

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The Modi Government got elected on the promise of ‘Good Governance’ and the hope of India seeing better days ahead. Ten years of UPA rule had left the country’s spirit broken especially in the last few years.

The Modi Government has completed about 7 months in power. They have made all the right noises about reform in Parliament, hosted foreign dignitaries and announced various cleanliness drives.

The key concern was the lack of majority of the BJP in the Rajya Sabha and their ability (or lack of it) to push through key reform bills like the Insurance Bill.

To add to the confusion, various BJP members have been making controversial statements leading to Parliament getting stalled.

Since this is the first full session in Parliament, the Modi Government may get the benefit of doubt. The same benefit will not be available from the Budget session onwards. They will have to come up with an alternative to the chaos in Rajya Sabha.

One of the solutions could be having a joint session of Parliament, or winning over some regional parties.

The honeymoon period is over now and it is time for action. The decisive moment will arrive sometime in middle of February when the Budget session kicks off.

The Government has been lucky with the decline in crude oil prices, which is a once in a lifetime event for any Government. They have been given an extended lifeline thanks to this.

The entire market rise so far - on the hope and hype of Modi - is over. Further rises will be dictated by performance alone.

Progress on the GST Bill, the Insurance Bill, the Union and the Rail budgets are some points which the FIIs and the investment community will be keenly watching over the next few months.

If the Global factors settle down, then one could see a buoyant pre-Budget rally on hope. But if the budget disappoints then one could expect a major correction post the budget.

‘Acche Din’ was a good marketing slogan. Falling oil price helped bring in some cheer but the real battle starts now.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

WTI and Brent Crude Oil charts: an update

WTI Crude chart

The following comment appeared on a previous post on the daily bar chart pattern of WTI Crude oil: “…oil’s price touched a 5 year low of 63 -  and may fall even lower.” After falling below 55, oil’s price has been consolidating sideways in an effort to find a bottom around 55.

All three technical indicators have formed bullish ‘rounding bottom’ patterns inside their respective oversold zones. Does that mean that the strong down trend is about to get reversed?

Strong volumes and sharp volatility in the past few trading sessions indicate investor uncertainty – which often precedes a trend change. However, bears have a strong grip which they are unlikely to release in a hurry. Any upward bounce may be used to sell.

On longer term weekly chart (not shown), oil’s price is trading well below its three weekly EMAs in a long-term bear market. However, the fall since Jul ‘14 has been a bit too sharp. A bounce up is a possibility. Weekly technical indicators are well inside their oversold zones.

Brent Crude chart

The daily bar chart pattern of Brent Crude oil continued its waterfall-like descent and slipped below the 60 level. For the past 4 trading sessions, oil’s price has been consolidating sideways as it tries to find a bottom around 60.

MACD, RSI and Slow stochastic are still inside their respective oversold zones – though all three have formed ‘rounding bottom’ patterns that may lead to an upward bounce in oil’s price. Will it provide a bottom-fishing opportunity? Not really.

On longer term weekly chart (not shown), all three weekly EMAs are falling, and oil’s price is trading below them in a long-term bear market. Technical indicators are well inside their oversold zones.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Dec 19, ‘14

S&P 500 Index Chart

The daily bar chart pattern of S&P 500 index dropped briefly below 1975, but suddenly turned around and recovered almost all its losses from its Dec 5 top in just three trading sessions. US Fed’s decision not to raise interest rates in the near future provided just the impetus the bulls needed.

All three EMAs are rising and the index is trading above them. The bulls are back in control after a sharp correction. Or, are they? Note that the index is still within the ‘broadening top’ pattern, and needs to overcome the resistance of the upward-sloping blue line of the pattern for the bull market to continue.

An increase in volatility – as witnessed during the formation of the ‘broadening top’ pattern – is a sign of nervousness among investors. Does that mean a change of trend is in the offing? One needs to wait for technical confirmation – but the formation of a bearish reversal pattern should be respected.

Daily technical indicators are back in bullish zones. A continuation of the rally is likely.

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

FTSE 100 Index Chart

The daily bar chart pattern of FTSE 100 dropped to an intra-day low of 6145 on Dec 16 ‘14, but bounced up strongly on the next three days to move above the 6550 level – where it faced resistance from its falling 50 day EMA.

On Oct 16 ‘14, the index had touched an intra-day low of 6073. By touching a slightly higher bottom on Dec 16 ‘14, the index appears to have formed a ‘double bottom’ reversal pattern. However, volumes were higher when the index touched its Oct 16 low.

Also, on a closing basis, the Oct ‘14 low was 6196 whereas the Dec ‘14 low was 6183. That means a bearish pattern of ‘lower tops and lower bottoms’ has been formed.

Technical indicators have corrected oversold conditions, but remain in bearish zones.

On longer term weekly chart (not shown), the index dropped below its 200 week EMA, but managed to close well above it. However, the index is trading below its 20 week and 50 week EMAs. Weekly technical indicators are looking bearish. Bears may mount another attack.

BSE Sensex and NSE Nifty 50 index chart patterns – Dec 19, 2014

In the last full week of trading in calendar year 2014, both Sensex and Nifty indices bounced up after testing support levels to close marginally higher for the week. However, neither index is technically out of the woods yet – so caution is advised.

FIIs continued their selling spree in equity throughout the week. DIIs were net buyers. For the month of Dec ‘14 so far, FIIs have been net sellers of about Rs 940 Crores while DIIs turned bulls by buying equity worth Rs 3630 Crores.

Important bills are getting stuck in Parliament as opposition parties – particularly a scam-tainted one – have been obstructing proceedings on various pretexts. Offshoots of the ruling party have done their bit in stalling proceedings with their respective divisive agenda.

BSE Sensex index chart

The following comment appeared in last week’s analysis of the daily bar chart pattern of Sensex: “The index may find support in the zone between 26300-27000.” Note that the index dropped to an intra-day low of 26469 on Wed. Dec 17 before bouncing up.

Though the index has managed to climb above the 27350 level by the end of the week, it is facing twin resistance from its falling 20 day and 50 day EMAs. A new high may elude bulls during the remainder of this calendar year.

Technical indicators are in the process of correcting oversold conditions, but are in bearish zones. MACD has stopped falling, but is well inside negative zone and below its signal line. ROC has formed a small ‘rounding bottom’ bullish pattern inside its oversold zone, and is trying to cross above its falling 10 day MA. RSI has also formed a small ‘rounding bottom’ pattern inside its oversold zone. Slow stochastic has just emerged from its oversold zone.

The correction has improved the technical ‘health’ of the chart. The index is trading well above its rising 200 day EMA in a long-term bull market. By touching a higher bottom, the bullish pattern of ‘higher tops and higher bottoms’ continues.

NSE Nifty 50 index chart

The weekly bar chart pattern of Nifty dropped below its 20 week EMA intra-week for the first time since Feb ‘14, but found strong support from the 7840 level and the rising Up trend line 2 (in dark blue). The index bounced up to close above its 20 week EMA and the 8180 level – closing flat for the week, but on an uptick in volumes.

Weekly technical indicators have corrected overbought conditions, but remain in bullish zones. MACD has crossed below its signal line, and is about to drop below its overbought zone. ROC is trying to cross above its 10 week EMA in positive zone. RSI and Slow stochastic have dropped from their respective overbought zones, but are above their respective 50% levels.

A bit of consolidation can’t be ruled out. The index is trading above both its weekly EMAs in a long-term bull market.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are overcoming sharp bull market corrections. Both indices should resume the next legs of their bull rallies soon. The corrections provided good entry opportunities.