Stock Market Charts | India Mutual Funds Investment

Possible Nifty retracement levels

noreply@blogger.com (Subhankar) — Sun, 31 Jan 2021 07:21:00 +0000

First the bad news. FIIs were net sellers of equity worth a huge Rs 127 Billion during the previous five trading sessions (Jan 22, 25, 27-29). That is the main reason for Nifty shedding 1150 points (7.8%) from its Jan 21 lifetime top (of 14753.5) to close just below its 50 day EMA.

Now the good news. Despite the sharp correction, the index is trading well above its rising 200 day EMA. That means the bull market is alive and kicking.

So, is this index dip a good time to buy? That would depend on an investor's risk tolerance and investment time horizon. The best time to buy is when you have money to spare.

While timing the market is always difficult, it helps not to buy near market tops. Experienced investors have the patience to wait months (sometimes even years) for better buying opportunities.

For those not so experienced, having some idea of index (or stock) retracement levels can help to decide about entry points.

Typically, Fibonacci retracement levels of 38.2% and 50% seem to work on technical charts. What are these levels for Nifty?

Let us make a couple of assumptions. The first assumption is that the index is correcting the gains made from its Sep '20 low (of 10790). A 38.2% retracement gives a figure of around 13250; a 50% retracement means about 12800. By touching a low of 13600 on Fri. Jan 29, Nifty has almost retraced 38.2%.

Note that the index has penetrated the lower Bollinger Band. Also, the Slow stochastic indicator is well inside its oversold zone. So, a technical bounce is very much within the realm of possibilities.

Question is: Will the likely bounce rise to a new high, or get terminated at the 20 day SMA (middle Bollinger Band, marked by green dotted line)? In the latter case, the correction may resume and the index can drop to lower levels.

That leads us to our second assumption - that Nifty is actually in the process of correcting all gains made since its Mar '20 low (of 7511). A 38.2% retracement gives a figure of around 12000; a 50% retracement can drop the index to 11150.

That leaves the door open for a test of support from the 200 day EMA - currently at 12200. What if the 200 day EMA is breached and the index does fall to 11150 (however unlikely it may seem now)?

Then we may need to reassess the sustainability of the current bull phase. The annual budget on Feb 1 can have some short-term effect on the market. Long-term, it is profitability and earnings growth of India Inc. that will decide the winners and losers.

Sticking to large-cap market leaders won't hurt.

Sensex, Nifty charts (Dec 18, 2020): rising higher but showing some signs of fatigue

noreply@blogger.com (Subhankar) — Sat, 19 Dec 2020 15:08:00 +0000

FIIs continued with their strong buying during the week. They were net buyers of equity worth Rs 118.06 Billion. DIIs tried their best to match them. They were net sellers of equity worth Rs 110.25 Billion. Sensex and Nifty both gained around 1.8% on a weekly closing basis.

India's CPI-based retail inflation eased marginally to 6.93% in Nov '20 from a six and a half year high of 7.61% in Oct '20 - thanks to easing of vegetable prices. WPI-based wholesale inflation rose for the fourth consecutive month to a nine months' high of 1.55%.

In Nov '20, India's exports declined 8.74% to US $23.52 Billion while imports declined 13.32% to $33.39 Billion. The trade deficit hit a 10 months' high of $9.87 Billion. During Apr-Nov '20, exports dropped 17.76% to $173.66 Billion while imports dropped 33.55% to $215.69 Billion - leaving a trade deficit of $42 Billion.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex again touched new intra-day (47026) and closing (46961) highs during the week. FIIs continued with their strong buying while ignoring stretched index valuation. A falling US Dollar index may have motivated them to do so.

Sensex is trading well above its three rising EMAs in a long-term bull market. It has been rising within a nine months long upward-sloping channel, and is testing resistance from the upper edge of the trading channel. There is a possibility of some correction or consolidation prior to the Christmas holidays.

Daily technical indicators are in bullish zones, and looking overbought. MACD is moving sideways after merging with its signal line. ROC is moving sideways along with its 10 day MA. RSI is rising higher inside its overbought zone. Slow stochastic is rising gradually inside its overbought zone.

The farmers' agitation is being allowed to fester by an adamant government. Instead of solving the problem, farmers are being vilified and forced to hunker down in the open in extremely cold weather. The negative effects are beginning to be felt in industry, food prices and movement of goods.

Macroeconomic fundamentals have taken a back seat as the index is rising on the back of a flood of FII money. Enjoy the bull ride while it lasts, but maintain trailing stop-losses to protect profits.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose for the seventh straight week to close at a new high of 13760. A falling US Dollar index has resulted in strong buying by FIIs - pushing the index higher into extremely stretched valuation zone.

The index has been rising within an upward-sloping channel for almost 9 months, and is trading well above its three rising weekly EMAs in a long-term bull market. FII buying has sustained the long rally, but there is possibility of some profit booking before Christmas holidays.

Weekly technical indicators are inside their respective overbought zones. MACD is rising above its signal line. ROC has dipped towards its rising 10 week MA. RSI and Slow stochastic are rising slowly.

Nifty's TTM P/E has touched a new high of 37.84 - which is far above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has climbed sharply from its overbought zone, and can trigger some near-term index consolidation or correction.

Bottomline? Sensex and Nifty charts are rising to newer highs on the back of strong buying by FIIs. Year-end profit booking by foreign fund houses is a distinct possibility. This is not a good time to look for new stock ideas. Hold existing positions with trailing stop-losses.

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

noreply@blogger.com (Subhankar) — Sat, 12 Dec 2020 15:41:00 +0000

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 (Dec 04, 2020): keep rising as FIIs maintain buying momentum

noreply@blogger.com (Subhankar) — Sat, 05 Dec 2020 15:14:00 +0000

FIIs continued with their strong buying momentum in a holiday-shortened trading week. They were net buyers of equity worth Rs 102.1 Billion. DIIs were net sellers of equity worth Rs 60.9 Billion. Both Sensex and Nifty gained more than 2% on a weekly closing basis.

IHS Markit India's Manufacturing PMI slipped to a 3 months low of 56.3 in Nov '20 from a 12 year high of 58.9 in Oct '20. India's Services PMI also dipped - to 53.7 in Nov '20 from 54.1 in Oct '20. (A reading above 50 indicates expansion.) The composite (Mfg. + Serv.) PMI dropped to 56.3 in Nov '20 from 58 in Oct '20.

As was widely expected, RBI's Monetary Policy Committee left interest rates unchanged and maintained an 'accomodative' stance at its last policy meeting in calendar year 2020.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex closed at a new high of 45080, as FIIs persisted with their strong buying momentum. The index has gained more than 19000 points (73.5%) from its Mar '20 closing low of 25981.

All three daily EMAs are rising, and the index is trading well above them in a bull market. As long as FIIs keep buying, expect the index to keep rising to new highs.

Daily technical indicators are looking bullish. MACD has merged with its signal line in bullish zone. ROC has crossed above its falling 10 day MA in neutral zone. RSI is about to re-enter its overbought zone. Slow stochastic is rising inside its overbought zone.

Note that all four daily technical indicators are showing negative divergences by touching lower tops while the index touched a new high. However, large inflow of FII liquidity has been brushing aside all technical headwinds.

A bit of circumspection may be a good idea at this stage. Booking part profits and keeping some cash in hand can provide opportunities to enter at lower price points, as calendar year-end profit booking by FIIs can start at any time.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose for the fifth straight week to close at a new high of 13259. Strong buying by FIIs ensured that the index continued its upward climb in blue-sky territory with no known resistances.

The index is trading well above its three rising weekly EMAs in a long-term bull market. However, such a strong rally may not sustain much longer. Also, year-end profit booking by FIIs may cause a pullback towards 12500.

Weekly technical indicators are looking overbought. MACD is rising above its signal line inside its overbought zone. ROC is rising above its 10 week MA in overbought zone. RSI has re-entered its overbought zone. Slow stochastic is inside its overbought zone but not showing any upward momentum. Some consolidation or correction may follow.

Nifty's TTM P/E touched a new high of 36.46 - which is way above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is moving sideways inside its overbought zone. Some near-term index consolidation or correction is possible.

Bottomline? Sensex and Nifty charts are continuing to climb to new highs on the back of FII liquidity inflow. Year-end considerations can lead to some profit booking by foreign fund houses. Book partial profits, or hold existing positions with trailing stop-losses.

Sensex, Nifty charts (Nov 27, 2020): soaring to new highs on a tsunami of FII liquidity inflow

noreply@blogger.com (Subhankar) — Sat, 28 Nov 2020 14:52:00 +0000

A tsunami of FII liquidity inflow boosted Sensex and Nifty to new highs past 44000 and 13000 levels respectively. During Nov '20, FIIs were net buyers of equity worth Rs 653.2 Billion - their highest ever monthly net buying. DIIs were net sellers of equity worth Rs 483.2 Billion - their highest monthly net selling ever.

The situation on the economic front is improving, but remains grim. India's Q2 (Jul-Sep '20) GDP contracted by a less-than-expected 7.5% following an unprecedented decline of 23.9% in Q1 (Apr-Jun '20). GDP had expanded by 5.2% in previous Q2 (Jul-Sep '19).

India's fiscal deficit during Apr-Oct '20 came in at Rs 9.5 Trillion, which is almost 120% of the FY 2020-21 annual target of Rs 7.96 Trillion. The lag in revenues continues to outpace the government's efforts at expenditure compression.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched a new intra-day high of 44825 on Wed. Nov 25, but formed a large 'reversal day' bar (higher high, lower close) and closed nearly 1000 points lower. The index recovered a little to close at 44150 by the end of the week - gaining more than 4500 points (11.4%) for the month.

All three daily EMAs are rising, and the index is trading above them in a bull market. Sideways consolidation during the past two weeks have helped to correct overbought conditions of technical indicators.

Daily technical indicators are turning bearish. MACD has slipped below its signal line in bullish zone. RSI has dropped from its overbought zone. Slow stochastic has fallen below its 50% level. Some more consolidation or correction is likely.

Q2 (Jul-Sep '20) corporate results were a pleasant surprise, though top line growth was minimal and bottom line improvement was helped by tax cuts and cost curtailments. Q3 (Oct-Dec '20) results will either confirm that business recovery is for real or that the improvement in Q2 was due to pent-up demand following the long lock down.

Strong bullish sentiment in the market may be hinting that business recovery is in full swing. Anecdotal evidence suggests otherwise. The larger and more established companies are grabbing market share from MSMEs.

That is not conducive for a broad-based economic growth and employment generation in the long run. Small investors who prefer mid-cap and small-cap stocks may face rough times unless they realign their portfolios towards large-cap stocks.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose for the fourth straight week to breach the 13100 level intra-week before closing at a new high of 12969. Huge buying by FIIs ensured that the index continued to soar in blue-sky territory.

Bulls remain in total control of the chart. The index is trading well above its three rising weekly EMAs in a long-term bull market. However, caution is advised as the index has gained a whopping 75% in just 8 months (from its Mar '20 low to the Nov '20 high).

Such a strong rally is unlikely to sustain much longer. Expect year-end profit booking by FIIs, which will help improve the technical 'health' of the chart.

Weekly technical indicators are looking overbought. MACD is rising above its signal line inside its overbought zone. RSI is hovering at the edge of its overbought zone. Slow stochastic is inside its overbought zone but showing slight downward momentum that is hinting at likely consolidation or correction.

After touching a new high of 35.9 on Tue. Nov 24, Nifty's TTM P/E has slipped down a bit to 35.66 - which is way above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped and remained inside its overbought zone since Nov 11. Some near-term index consolidation or correction is possible.

Bottomline? Sensex and Nifty charts are climbing to new highs on a tidal wave of FII liquidity inflow. Year-end considerations can lead to some profit booking by foreign fund houses. Upside risk is increasing by the day. Hold existing positions with trailing stop-losses, or take some profits home.

Sensex, Nifty charts (Nov 13, 2020): in blue-sky territories after touching lifetime highs

noreply@blogger.com (Subhankar) — Sun, 15 Nov 2020 15:29:00 +0000

FIIs continued with their buying spree during the week. They were net buyers of equity worth a massive Rs 198.69 Billion - far exceeding their entire net buying during Oct '20. DIIs were net sellers of equity worth Rs 135.11 Billion. Both indices gained 4.2% to touch lifetime highs.

According to RBI, India's GDP may have slipped into an unprecedented recession by contracting 8.6% during Q2 (Jul-Sep '20), following a 24% contraction during Q1 (Apr-Jun '20). (Two straight quarters of GDP contraction is a thumb-rule definition of a recession.)

India's Index of Industrial Production (IIP) grew at 0.2% in Sep '20 after contracting for six consecutive months. IIP had contracted by 4.6% in Sep '19. However, CPI-based retail inflation rose to 7.61% in Oct '20 - its highest level since May '14 - against 7.34% in Sep '20.

BSE Sensex index chart pattern

During 'muhurat' trading on Sat. Nov 14, the daily bar chart pattern of Sensex rose to touch lifetime intra-day (43830.9) and closing (43638) highs. The index is trading in blue-sky territory (with no known resistances) - well above its three rising daily EMAs in a long-term bull market.

In less than 8 months since touching an intra-day low of 25638.9 on Mar 24 '20, the index has made a spectacular gain of more than 18100 points (71%). However, many small investors who prefer mid-cap and small-cap stocks may be wondering why their portfolios are barely in profit.

The pandemic-induced lockdown and subsequent stuttering economic growth has affected smaller companies a lot more. Larger, well-established companies have been able to utilise tax cuts and lower interest rates to grab more market share from smaller and unorganised companies. The rich have got richer; the poor, poorer.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. RSI is moving sideways inside overbought zone. Slow stochastic is falling inside its overbought zone. While an index can remain overbought for long periods, some consolidation or correction may be around the corner.

Q2 (Jul-Sep '20) results of corporate India have shown clear improvement over Q1 (Apr-Jun '20) as economic activity is returning back towards normalcy post sudden lockdown in Mar '20. Manufacturing activity and credit growth still remains weak. Certain sectors - like hospitality, travel, transportation will take a long time to recover.

High food prices despite a bountiful monsoon is another concern. Sky-high vegetables prices have seriously affected both rural and urban poor. The increasing gap between the rich and the poor does not augur well for a broad-based economic growth. Sooner than later, the stock market indices will revert to mean.

Till then, extra due diligence is recommended before investing in individual stocks. Those who are already invested in good, diversified portfolios should add to existing holdings on dips but avoid chasing fresh ideas at a market top.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose sharply for the second straight week to close at a lifetime high of 12780. Massive buying by FIIs has propelled the index into blue-sky territory with no known resistances.

Bulls are in total control of the chart. The index is trading well above its three rising weekly EMAs in a long-term bull market. However, caution is advised near a lifetime high.

A sharp correction had followed after the index had touched its previous top in Jan '20. Such a dramatic correction is unlikely at this stage - specially with FIIs in buoyant buying mood. A more moderate correction or consolidation will improve the technical 'health' of the chart.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line towards its overbought zone. RSI has moved up to the edge of its overbought zone. Slow stochastic has bounced up from the edge of its overbought zone but showing negative divergence by touching a lower top. That may trigger some consolidation or correction.

Nifty's TTM P/E has moved up to 34.73 - which is way above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone. Near-term index upside appears limited.

Bottomline? Sensex and Nifty charts have climbed up to lifetime highs on the back of huge buying by FIIs. Overbought technical indicators can lead to some profit booking. Stay on the sidelines till bullish euphoria subsides.

Sensex, Nifty charts (Nov 06, 2020): soaring on the back of FII buying

noreply@blogger.com (Subhankar) — Sat, 07 Nov 2020 14:03:00 +0000

FIIs were net buyers of equity worth a huge Rs 134 Billion - almost equalling their entire net buying during Oct '20. DIIs were net sellers of equity worth Rs 67.9 Billion. Both indices gained nearly 5.5% for the week.

Nikkei/IHS Markit India Manufacturing PMI for Oct '20 rose to 58.9 - its highest level since mid-2008 - from 56.8 in Sep '20. The Services PMI climbed to 54.1 in Oct '20 from 49.8 in Sep '20 - its highest level since Feb '20 and well above the 50 mark that separates growth from contraction.

The Composite PMI (Mfg. + Serv.) rose to 58 in Oct '20 - its highest level since Jan '12 - from 54.6 in Sep '20.

India's merchandise exports declined 5.4% to US $24.82 Billion in Oct '20. Imports fell 11.56% to $33.6 Billion, narrowing the trade deficit to $8.78 Billion against $11.76 Billion in Oct '19.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex bounced up sharply after receiving good support from its 50 day EMA in the previous week. The index opened with an upward 'gap' on Thu. Nov 5, thanks to a flood of FII money. The next day, it rose higher to close within 60 points of its lifetime closing high of 41945 (touched back in Jan 17 '20).

The index is trading above its three rising daily EMAs in a long-term bull market. However, proximity to a previous high, and combined negative divergences visible on all four daily technical indicators (which failed to touch new highs with the index) calls for caution.

Daily technical indicators are looking bullish. MACD has crossed above its signal line in neutral zone. ROC has moved above its 10 day MA in neutral zone. RSI is climbing above its 50% level. Slow stochastic has bounced up sharply to re-enter its overbought zone. Some more near-term index upside is possible, but avoid entering the market now.

Aggregate Q2 (Jul-Sep '20) results of 1000 companies show top line pressure but bottom line improvements (thanks to tax cuts). Pharma companies declared good numbers. ITC results were a disappointment, because the pandemic has affected its cigarettes, hospitality and stationery products businesses.

Small investors would do well not to get caught up in bullish euphoria. Good stocks are becoming more expensive. Tendency to look for hidden gems among junk stocks can be injurious to wealth. Sometimes, doing nothing is a good strategy.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose sharply to close within 100 points of its lifetime closing high of 12352 - touched in the week ending on Jan 17, '20. Strong FII buying negated technical headwinds. The index closed above its three rising weekly EMAs in a long-term bull market for the 18th straight week.

Bulls are in total control of the chart. A new lifetime high seems just a hop, skip and jump away. However, caution is advised near a lifetime high. Everyone remembers the sharp correction after the index touched its previous top in Jan '20.

What is the reason for the sudden rush of FII buying? Wasn't a win for Biden in the US elections considered bearish for the stock market? According to experts, since Democrats failed to get a majority in the US Senate, Biden will be unable to push through any new taxes. Sometimes, stock markets use any excuse to go up (or down)!

Weekly technical indicators are in bullish zones, and looking overbought. MACD is rising above its signal line in overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has bounced up from the edge of its overbought zone. RSI and Slow stochastic are showing negative divergences by failing to touch new highs with the index, and may trigger some consolidation or correction.

Nifty's TTM P/E has moved up to 33.09 - which is well above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is still in neutral zone - hinting at near-term index consolidation.

Bottomline? Sensex and Nifty charts have soared to their highest levels since touching their lifetime highs back in Jan '20. Negative divergences in technical indicators, and proximity to lifetime highs may lead to profit booking. Stay invested, but avoid fresh commitments.

Sensex, Nifty charts (Oct 30, 2020): treading water before US elections

noreply@blogger.com (Subhankar) — Sat, 31 Oct 2020 15:11:00 +0000

For the month of Oct '20, FIIs were net buyers of equity worth Rs 145.37 Billion. DIIs were net sellers of equity worth Rs 173.18 Billion - their highest monthly net selling since Mar '16. Both indices gained more than 3.5% for the month.

India's fiscal deficit during Apr-Sep '20 period touched Rs 9.1 Trillion, which exceeded the full year target of Rs 7.96 Trillion by almost 15%. For FY 2020-21, fiscal deficit may reach 9% of GDP against a target of 3.5%.

The cumulative fiscal deficit for Centre and states may touch 13% of GDP during FY 2020-21 against 7% of GDP during FY 2019-20.

BSE Sensex index chart pattern

After spending almost the entire month above its three daily EMAs in bull territory, the daily bar chart pattern of Sensex slipped below its 20 day EMA during the last two trading days.

The index bounced up after receiving good support from its rising 50 day EMA on the last trading day of Oct '20, and closed more than 2000 points above its 200 day EMA in a bull market.

Bears continue to fight doggedly. The month's trading has formed a bearish 'rounding top' pattern. If the pattern plays out, a re-test of support from the 200 day EMA is possible.

Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in neutral zone. ROC is below its sliding 10 day MA in neutral zone. RSI is falling below its 50% level. Slow stochastic has dropped to the edge of its oversold zone, and can trigger a technical bounce.

Q2 (Jul-Sep '20) results of India Inc. declared so far have mostly exceeded expectations, even as top and bottom lines have degrown. HUL and L&T declared substantial interim dividends. [Companies with better performances usually declare their results earlier. Subsequent results may have more misses than hits.]

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs in a long-term bull market for the 17th straight week. However, the index dropped below 11700, losing almost 300 points (2.4%) on a weekly closing basis.

Bulls need not worry too much as all three weekly EMAs are still rising, which means bulls are in control of the chart. Note that FIIs started selling during the last three days of the week gone by. Also, the past 4 weeks' trading has formed a small 'rounding top' pattern that has bearish implications.

Weekly technical indicators are in bullish zones, but not showing any upward momentum. MACD is above its rising signal line in overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has dropped to the edge of its overbought zone. Some more index consolidation or correction is likely.

Nifty's TTM P/E has moved down to 31.90 - which remains well above its long-term average and inside its overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone - hinting at near-term index consolidation.

Bottomline? Sensex and Nifty charts have been consolidating after reaching close to their lifetime highs (touched back in Jan '20). The stock market appears to be biding its time till US elections get over next week. Dow and S&P 500 indices are correcting in anticipation of a Biden win. Stay cautiously optimistic.

Sensex, Nifty charts (Oct 16, 2020): pause after sharp two weeks long rallies

noreply@blogger.com (Subhankar) — Sat, 17 Oct 2020 16:10:00 +0000

FIIs were net sellers of equity on Thu. and Fri. (Oct 15 and 16) but were net buyers during the first three trading days of the week. Their total net buying was worth Rs 11.86 Billion. DIIs were net sellers of equity during the entire week. Their total net selling was worth Rs 52.17 Billion.

India's Index of Industrial Production (IIP) contracted for the 6th straight month in Aug '20 to -8% against a downward revised -10.8% in Jul '20 and -15.8% in Jun '20. The contraction may continue in Sep '20.

After contracting for 6 months in a row, India's merchandise exports in Sep '20 rose by 5.27% YoY to US $27.4 Billion, while imports slipped 19.6% to $30.31 Billion. The trade deficit narrowed to $2.91 Billion against $11.67 Billion in Sep '19.

BSE Sensex index chart pattern

After a sharp rally from its 200 day EMA, the daily bar chart pattern of Sensex consolidated sideways just below the 41000 level during the first three trading days.

On Thu. Oct 15, the index breached the 41000 level intra-day, but fell sharply as both FIIs and DIIs resorted to booking profit. The index dropped below 40000 towards its 20 day EMA - forming a large 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Bears need not get too elated. All three daily EMAs are rising and the index is trading above them in a bull market. However, Friday's pullback ended with a close just below 40000, leaving the door open for some more correction.

Daily technical indicators are in bullish zones, but showing downward momentum. MACD is sliding down towards its rising signal line. ROC has crossed below its 10 day MA. RSI is turning down inside its overbought zone. Slow stochastic has dropped to the edge of its overbought zone.

Vedanta delisting failed. Couple of new share listings failed to generate much excitement. Bullish sentiment may be waning even as new investors are continuing to open demat accounts in large numbers (as per Zerodha).

Q2 (Jul-Sep '20) corporate results and festival season sales of consumer discretionary and durables will now be in focus. Be very selective in choosing your investment vehicles. The easy money has already been made. Remember the 'Greater Fool Theory' - particularly near market tops.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty breached the psychological level of 12000 intra-week for the first time in 8 months but failed to test its lifetime high of 12430 (touched back in Jan '20). The index dropped below 11700 before closing above 11750, losing about 150 points (1.3%) on a weekly closing basis.

Bulls have nothing to worry about for now, as all three weekly EMAs are rising and Nifty is trading above them in a long-term bull market. However, caution is advised as the index formed a weekly 'reversal' bar (higher high, lower close) that sometimes mark an intermediate top.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line in overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has re-entered its overbought zone. Some index consolidation or correction is likely.

Nifty's TTM P/E touched a new high 34.87 on Wed. Oct 14, before slipping down to 34.13 - which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is sliding down below the edge of its oversold zone - hinting at some near-term index upside.

Bottomline? Sensex and Nifty charts have reached close to their lifetime highs touched back in Jan '20. Mid-cap and small-cap stocks have started correcting. A handful of large-cap stocks fuelled the last leg of the rally. Exuberance should be curbed. Time for circumspection.

Sensex, Nifty charts (Oct 09, 2020): 5 weeks long down trends reversed by FII buying

noreply@blogger.com (Subhankar) — Sat, 10 Oct 2020 15:48:00 +0000

FIIs were net sellers of equity on Fri. Oct 9, but were net buyers during the first four trading days of the week. Their total net buying was worth Rs 33.7 Billion. DIIs were net buyers of equity on Thu. and Fri. (Oct 8 and 9), but were net sellers during the first three trading days. Their total net selling was worth Rs 23.89 Billion.

IHS Markit's India Services PMI rose to 49.8 in Sep '20 from 41.8 in Aug '20, but remained below the 50 mark - indicating contraction. The Composite (Mfg. + Serv.) PMI expanded for the first time in 6 months, rising from 46 in Aug '20 to 54.6 in Sep '20.

After its bi-monthly MPC meeting from Oct 7-9, '20 RBI decided to keep the repo and reverse repo rates unchanged at 4% and 3.35% respectively. RBI also forecast a GDP contraction of 9.5% for FY 2020-21.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows how a sudden gush of FII money has blown away technical resistances. Expectation of a second round of stimulus in the US may have turned FIIs into bulls.

The 5 weeks long down trend (marked by blue down trend line) has been reversed and strong resistance from the 335 points downward 'gap' formed on Feb 28 has been overcome. Bears had no place to hide. Their short-covering helped the week's sharp 1800 points rally.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has climbed to the edge of its overbought zone. RSI is rising towards its overbought zone. Slow stochastic is well inside its overbought zone, and can trigger a pullback towards the 335 points downward 'gap' of Feb 28.

Q2 (Jul-Sep '20) corporate results have started hitting the market, with TCS releasing a decent set of numbers and announcing a share buyback. Wipro also announced a share buyback.

Dividends exceeding Rs 5000 received by shareholders now attract a 7.5-10% tax. (Earlier, companies had to pay a dividend distribution tax.) Promoters holding large chunks of stock may prefer to opt for buybacks - which reduce equity capital and thereby enhance EPS.

If you are thinking about tendering shares to a company offering a buyback - think again. You may offer 500 shares, but the company may accept only 170. Also, buybacks attract capital gains tax - so you might as well sell in the market.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above the 11900 level for the first time in more than 7 months - gaining nearly 500 points (4.3%) on a weekly closing basis.

The bearish pattern of 'lower tops, lower bottoms' formed during the past 5 weeks have been negated - thanks to FII buying. All three weekly EMAs are rising, and Nifty is trading above them in a long-term bull market.

Weekly technical indicators are in bullish zones and showing some upward momentum. MACD is rising above its signal line in overbought zone. RSI is rising above its 50% level. Slow stochastic is moving up towards its overbought zone after dropping down from it. Some more index upside is possible.

Nifty's TTM P/E has moved up to 34.71, its highest level ever and well above its long-term average deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone - and can limit near-term index upside.

Bottomline? Sensex and Nifty charts have reversed 5 weeks long down trends on the back of FII buying. Bulls are back in control. However, caution is advised as the broader market didn't participate during the week's rally. Check Q2 (Jul-Sep '20) corporate results before committing fresh money to individual stocks.

Sensex, Nifty charts (Oct 01, 2020): in 5 weeks long down trends after 5 months long rallies

noreply@blogger.com (Subhankar) — Sat, 03 Oct 2020 15:43:00 +0000

After 4 straight months of net buying, FIIs were net sellers of equity during Sept '20. Their total net selling was worth Rs 114.11 Billion. DIIs were net buyers of equity during Sept '20. Their total net buying was worth Rs 1.1 Billion.

During Apr-Aug '20, India's fiscal deficit was Rs 8.7 Trillion, which was 109.3% of the annual budget estimate of Rs 7.96 Trillion. The fiscal deficit was 78.7% of the annual budget estimate during Apr-Aug '19.

The IHS Markit India Manufacturing PMI increased to 56.8 in Sept '20 from 52 in Aug '20. It was the second straight month of expansion (a reading above 50) after 4 months of contraction.

India's merchandise exports rose 5.3% YoY to US $27.4 Billion in Sep '20 while imports declined 19.6%, leaving a trade deficit of $2.91 Billion against $11.67 Billion in Sep '19. During Apr-Sep '20, exports were down 21.43% to $125.1 Billion while imports were down 40.1% to $148.7 Billion on a YoY basis.

BSE Sensex index chart pattern

In a holiday-shortened trading week, bulls took the initiative on the daily bar chart pattern of Sensex. After facing resistance from its 20 day EMA during the first three trading days, the index formed a 174 points upward 'gap' and closed above its three EMAs in bull territory.

Bears may not give up their fight easily. Note that the index not only remained below the 335 points downward 'gap' formed back on Feb 28th, it also traded below the (blue) down trend line (drawn through its Aug 31 and Sep 16 tops).

Daily technical indicators are looking neutral to mildly bullish. MACD is trying to cross above its signal line in neutral zone. ROC has moved above its 10 day MA in neutral zone. RSI is at its 50% level. Slow stochastic has crossed above its 50% level.

Several IPOs and FPOs have been hitting the market in quick succession. Most have been oversubscribed by large percentages and have subsequently listed on the stock exchanges at huge premiums to their issue prices.

These are signs of a market top, as large amounts of money are getting sucked out of the secondary market. Expect more index consolidation till Q2 (Jul-Sep '20) corporate results are announced from mid-Oct '20.

With the festival season approaching fast, there is anecdotal evidence that malls are getting crowds and people are overcoming their virus fears to visit restaurants and bars. That is worrying because similar opening up in western countries led to a second wave of virus infections. Stay safe, wear masks and use hand sanitisers.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above the 'support-resistance zone' between 11000-11250 - gaining more than 360 points (3.3%) on a weekly closing basis, but remained below the (purple) down trend line for the 5th straight week.

The index has formed a bearish pattern of 'lower tops, lower bottoms' during the past 5 weeks after a sharp rally from the Mar '20 low. But bears are not yet in control. All three weekly EMAs are rising, and Nifty is trading above them in a long-term bull market.

Weekly technical indicators are in bullish zones but not showing much upward momentum. MACD is moving sideways above its signal line in overbought zone. RSI is sliding down towards its 50% level. Slow stochastic has dropped down from its overbought zone. Some more correction/consolidation is likely.

Nifty's TTM P/E has moved up to 33.18, its highest level since Sep 16th and well above its long-term average deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is moving down inside its oversold zone - hinting at near-term index consolidation or correction.

Bottomline? Sensex and Nifty charts are in 5 weeks long down trends after sharp rallies from their Mar '20 lows. Expect more consolidation or correction during the next couple of weeks. Wait for Q2 (Jul-Sep '20) corporate results before committing fresh money to individual stocks.

Sensex, Nifty charts (Sep 25, 2020): bears making their presence felt

noreply@blogger.com (Subhankar) — Sat, 26 Sep 2020 14:34:00 +0000

FIIs were net sellers of equity on all five trading days of the week. Their total net selling was worth a huge Rs 104.91 Billion. DIIs were net sellers of equity on Mon. Sep 21, but were net buyers during the next four days. Their total net buying was worth Rs 42.49 Billion.

The National Council for Applied Economic Research (NCAER) has made a revised projection that India's GDP growth will contract 12.7% in Q2 (Jul-Sep '20), 8.6% in Q3 (Oct-Dec '20) and 6.2% in Q4 (Jan-Mar '21). For FY 2020-21, GDP contraction will touch 12.6%. A thumb rule definition of recession is two straight quarters of contracting GDP.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows that bulls have stumbled at the last hurdle - a 335 points downward 'gap' formed on Feb 28 - in their efforts to propel the index to a new high.

After moving well above the 'gap' to touch an intra-day high of 40010 on Aug 31, the index had formed a large 'reversal day' bar (higher high, lower close) that marked an intermediate top.

Since then, Sensex faced strong resistance from the 'gap', and failed to close above the 'gap' even for a single day. It has formed a bearish pattern of 'lower tops, lower bottoms'.

On Thu. Sep 24, the index closed below its 200 day EMA for the first time since Jul 1, but bounced up to close above the 200 day EMA in bull territory by the end of the week. Any respite for bulls may be short-lived.

The 20 day EMA has formed a bearish 'rounding top' pattern. The 50 day EMA is also forming a similar pattern. Both EMAs may provide resistance to any upward move by the index.

Daily technical indicators are looking neutral to bearish. MACD is sliding below its signal line in neutral zone. ROC is in bearish zone, moving up towards its sliding 10 day MA. RSI has bounced up from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.

The sudden lockdown with 4 hours notice in Mar '20 had created a supply shock for the Indian economy. Millions of job losses, shattered MSMEs and a raging pandemic are now providing a demand shock to the economy, from which it may take 2-3 years to recover.

All prognostications of a 'V' shaped economic recovery should be ignored. An economic recession is hardly conducive to a booming stock market. Small investors should focus on protecting their profits and capital.

NSE Nifty index chart pattern

The following remark was made in last week's post on the weekly bar chart pattern of Nifty: "Convincing breach of an up trend line is often a sign of trend reversal."

After crossing the 11750 level on Aug 31, the index had breached the (pink) up trend line, and has formed a bearish pattern of 'lower tops, lower bottoms' since then.

Nifty dropped sharply below the 'support-resistance zone' between 11000-11250 and fell below its 20 week and 50 week EMAs intra-week, before bouncing up to close just inside the 'support-resistance zone' - losing 455 points (3.95%) during the week.

Bears are not in control yet, since the index managed to close above all three weekly EMAs in long-term bull territory. However, a test of support from the 200 week EMA may be in the offing.

Weekly technical indicators are in bullish zones but showing downward momentum. MACD is above its signal line but forming a bearish 'rounding top' pattern. RSI is falling towards its 50% level. Slow stochastic has slipped down from its overbought zone - hinting at some more correction/consolidation.

Nifty's TTM P/E has moved down to 32.12, which remains well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has moved up sharply inside its oversold zone. Some near-term index consolidation or correction is likely.

Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts, both indices continue to consolidate near resistance zones. Some more correction or consolidation is likely. Wait for lower levels to add defensive sector stocks you may already own.

Sensex, Nifty charts (Sep 18, 2020): consolidation continues after sharp rallies

noreply@blogger.com (Subhankar) — Sat, 19 Sep 2020 16:01:00 +0000

FIIs were net sellers of equity on Thu. Sep 17, but were net buyers during the other days of the week. Their total net buying was worth Rs 16.89 Billion. DIIs were net sellers during all five days. Their total net selling was worth Rs 23.97 Billion.

Total vehicle registrations at Regional Transport Offices during Aug '20 fell 26.81% YoY. While tractor registrations grew 27.8%, PV, 2W, CV and 3W registrations fell 7.1%, 28.7%, 57.4% and 69.5% respectively.

CPI based retail inflation slipped a bit to 6.69% YoY in Aug '20 from 6.73% in Jul '20. It was at 3.28% in Aug '19. WPI based wholesale inflation turned positive in Aug '20 for the first time since Mar '20, rising to 0.16% YoY in Aug '20 from -0.58% in Jul '20.

Exports fell 12.7% YoY in Aug '20 while imports were down 26%, resulting in a lower trade deficit of US $6.77 Billion against $13.86 Billion a year ago.

BSE Sensex index chart pattern

During the week, the daily bar chart pattern of Sensex consolidated sideways while trading above its three daily EMAs in a bull market. However, bears put up a good fight at the 335 points downward 'gap' (formed on Feb 28) - continuing to frustrate efforts by bulls to push the index higher for the third straight week.

A foray inside the 'gap' zone on Wed. Sep 16 could not be sustained despite buying by FIIs. On a weekly basis, the index closed flat. The hurdle of the 'gap' will need to be overcome before bulls can resume control of the chart.

Daily technical indicators are looking neutral to bullish. MACD is moving sideways after merging with its signal line in bullish zone. ROC has moved above its 10 day MA in neutral zone. RSI has just crossed above its 50% level. Slow stochastic is rising above its 50% level.

US stock indices closed lower for the third straight week, as a tech-led sell-off intensified. If current restrictions on short selling are not extended beyond Sep 24, expect selling to intensify in Indian stock indices as well.

After 50% gains from its Mar '20 low, do not expect Sensex to surge much higher. Stocks like RIL, which has gained more than 100% since its Mar '20 low, HDFC twins, HUL fuelled the index rally.

Now midcap and smallcap stocks are coming to the forefront and several IPOs are in the pipeline. Small investors should be extra cautious not to fall into the trap of making easy money with little effort.

Wealth building in the stock market requires knowledge, discipline, patience and a lot of time for the magic of compounding to take effect. Quick profits are here today, gone tomorrow.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty had bounced up after dropping inside the 'support-resistance zone' between 11000-11250 in the previous week. Despite FII buying, the index failed to make much upward progress - gaining about 40 points (0.35%) on a weekly closing basis.

Convincing breach of an up trend line is often a sign of trend reversal. But bears are still on the back foot, since all three weekly EMAs are moving up and the index is trading above them in long-term bull territory.

Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is above its signal line inside its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic is sliding down towards the edge of its overbought zone.

After touching a new high of 33.03 on Tue. Sep 15, Nifty's TTM P/E has moved down a bit to 32.98, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone. Some more near-term index consolidation or correction is possible.

Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts, both indices have been consolidating near resistance zones. Some more consolidation or correction is likely. Stay on the sidelines. Wait for better entry opportunities.

Sensex, Nifty charts (Sep 11, 2020): consolidating after sharp rallies from Mar '20 lows

noreply@blogger.com (Subhankar) — Sat, 12 Sep 2020 14:45:00 +0000

FIIs were net sellers of equity during the first three days of the week, but were net buyers on Thu. and Fri. (Sep 10 and 11). Their total net selling was worth Rs 83.6 Million. DIIs were net buyers of equity on Tue. (Sep 8), but net sellers on the other four days. Their total net selling was worth Rs 15.01 Billion.

India's Index of Industrial Production (IIP) contracted 10.4% YoY in Jul '20, against an expansion of 4.9% in Jul '19. It was the fifth straight month of contraction. IIP had contracted 15.7%, 33.8%, 57.3% and 16.7% in Jun '20, May '20, Apr '20 and Mar '20 respectively.

Rapid spread of the Covid 19 pandemic is likely to affect recovery of industrial production for much longer than expected earlier. There is no sign of the 'V' shaped recovery touted by the CEA and Finance Ministry.

BSE Sensex index chart pattern

The 335 points downward 'gap' (formed on Feb 28) on the daily bar chart pattern of Sensex continued to act as a strong resistance for bulls. The index spent the first three days of the week below its 20 day EMA, the next two days above its 20 day EMA, but all five days below the 'gap'.

After the previous week's trend line breach, bears were able to hold back charging bulls for a second straight week. However, the chart structure remains bullish. The 20 day EMA is above the 50 day EMA and the 50 day EMA is above the 200 day EMA. Both the 50 day and 200 day EMAs are rising. The index is trading above all three EMAs in a bull market.

A convincing move above the Feb 28 'gap' is required if the bulls are to wrest back control. Bears will try to ensure that does not happen before a proper correction.

Daily technical indicators are looking neutral to bearish. MACD is moving sideways below its signal line in bullish zone. ROC is sliding down below its 10 day MA in neutral zone. RSI is seeking support from its 50% level. Slow stochastic has bounced up from its oversold zone.

The index may consolidate some more before making a clear directional move. Most of the good news have already been 'discounted'. The bad news have been kept hidden or camouflaged - whether it is the current state of the economy or the actual on-ground situation at the Chinese border.

Pliant TV stations have been used to raucously divert attention of the public from real issues like unemployment, farmer suicides, clampdown on any form of dissent and inept handling of a raging pandemic by focussing on the dark underbelly of Bollywood.

By now, it is clear that a combination of easy liquidity and several hundred thousand first-time traders are behind the sharp index rally from the Mar '20 low. For the rally to sustain, corporate earnings will need to catch up fast. Otherwise, the high index valuation will revert to mean.

In such a market, small investors need to be extremely stock specific - preferably in defensive sectors like pharma, IT, FMCG. Quick profits have a tendency of disappearing like a mirage.

NSE Nifty index chart pattern

After touching a high of 11794 in the previous week, the weekly bar chart pattern of Nifty had formed a large weekly 'reversal' bar (higher high, lower close) and closed well below the (purple) up trend line drawn from the Mar '20 low. The index bounced up after dropping inside the 'support-resistance zone' between 11000-11250. (The possibility was mentioned in last week's post.)

Convincing breach of an up trend line is often a sign of trend reversal. The pullback from a 'support-resistance zone' may provide bears with a selling opportunity. Note that all three weekly EMAs are moving up and the index is trading above them in long-term bull territory.

Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is above its signal line inside its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic is sliding down inside its overbought zone.

Nifty's TTM P/E has moved up to 32.86, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has moved up to the edge of its oversold zone. Some near-term index upside or consolidation is likely.

Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts in the previous week, both indices consolidated near resistance zones. Some more consolidation or correction is likely. Avoid the urge to buy. Better entry levels may be available for those who are patient.

Sensex, Nifty charts (Sep 04, 2020): up trend lines breached but bull markets still intact

noreply@blogger.com (Subhankar) — Sat, 05 Sep 2020 15:45:00 +0000

FIIs were net buyers of equity on Tue, Wed. and Thu. (Sep 1, 2 and 3), but net sellers on Mon. and Fri. Their total net selling was worth Rs 38.0 Billion. DIIs were net buyers of equity on Mon. and Thu., but net sellers on the other three days. Their total net selling was worth Rs 10.89 Billion.

IHS Markit India Manufacturing PMI rose to a 6 month high of 52 in Aug '20 from 46 in Jul '20. A reading above 50 indicates expansion. Services PMI increased to 41.8 in Aug '20 from 34.2 in Jul '20, but remained in contraction zone. The Composite (Mfg. + Serv.) PMI rose to 46 in Aug '20 from 37.2 in Jul '20 - its 5th straight month of contraction.

During Apr-Jul '20, India's fiscal deficit touched Rs 8.23 Trillion - which is already 103% of the budget estimate for FY 2020-21. Total revenue receipts was Rs 2.27 Trillion, while expenses were Rs 10.5 Trillion.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows that bulls stumbled at the very last hurdle - the 335 points downward 'gap' formed on Feb 28 '20 - in an effort to rise to a new high.

The index touched a 6 months high of 40010 intra-day on Mon. Aug 31, but formed a large 'reversal day' bar (higher high, lower close) and dropped to close below the 'gap' and the (blue) up trend line.

Sensex received support from its 20 day EMA, which encouraged bulls to attempt a pullback above the trend line during the next three days. But bears held firm. The index re-entered the 'gap' zone, but failed to move above it.

The stage was set for a confirmed reversal of the 5.5 months long up trend. The index opened trading with a downward 'gap' and slid down further to close below its 20 day EMA - forming a 5-days bearish pattern of 'lower top, lower bottom.'

Note that Sensex is trading almost 1900 points above its 200 day EMA. That means the bull market is intact. However, a convincing breach of a trend line should be treated with respect and caution.

Daily technical indicators are looking neutral to bearish. MACD has slipped below its signal line in bullish zone. ROC has dropped below its 10 day MA in neutral zone. RSI is falling towards its 50% level. Slow stochastic has moved below its 50% level to enter bearish zone.

Some more correction and/or consolidation can be expected. The economy is in doldrums - with a worse-than-expected contraction in GDP growth. Ignore all talk about a 'V' shaped recovery, as the pandemic is spreading like wild fire.

The 'easy money' has been made already. The next 12-18 months will test the mettle of small investors. Make your decisions wisely. You can only grow your wealth if you know how to protect your capital.

NSE Nifty index chart pattern

After touching a 6 months intra-week high of 11794, the weekly bar chart pattern of Nifty formed a large weekly 'reversal' bar (higher high, lower close) and closed well below the (purple) up trend line drawn from the Mar '20 low.

Convincing breach of an up trend line usually indicates a trend reversal. However, all three weekly EMAs are moving up and the index is trading above them in long-term bull territory. No need for bulls to panic yet. The 'support-resistance zone' between 11000-11250 should provide some near-term support.

Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is above its signal line inside its overbought zone. RSI has turned down towards its 50% level. Slow stochastic is moving down inside its overbought zone.

Nifty's TTM P/E touched a new lifetime high of 33.04 on Thu. Sep 3 before slipping down to 32.49, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone. Some more correction or consolidation is likely.

Bottomline? 5 months long up trend lines on Sensex and Nifty charts have been breached. Corrections in US stock indices motivated bears to put up a fight. Some more correction or some consolidation is likely. Rushing in to buy the dip may be counter-productive. Let the dust settle first.

Sensex, Nifty charts (Aug 28, 2020): moving higher on FII buying

noreply@blogger.com (Subhankar) — Sat, 29 Aug 2020 16:12:00 +0000

FIIs were net buyers of equity on all five trading days during the week. Their total net buying was worth Rs 54.5 Billion. DIIs were net sellers of equity on all five trading days, but could not keep pace with FII buying. Their total net selling was worth Rs 30.56 Billion.

SEBI had introduced certain restrictions on F&O trading to curb volatility on Mar 20. These restrictions, including limits on holding short positions, have been extended till Sep 24. Bulls are expected to drive home their advantage.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex moved up relentlessly on the back of strong FII buying and closed at its highest level in 6 months. Bears have been pushed back to the last ditch - a 335 points downward 'gap' that had formed on Feb 28th, a few days before the index crashed.

The index has already closed just above the 'gap' zone. It appears unlikely that bears will be able to put up much of a fight. An index up move to a new lifetime high may occur sooner than later.

All three EMAs are rising, and the index is trading above them - and above the (blue) up trend line - in a bull market. The 'golden cross' (of the 50 day EMA above the 200 day EMA - marked by light blue circle) had technically confirmed a return to a bull market. Bears are on the verge of throwing in the towel.

Daily technical indicators are looking bullish and a bit overbought. MACD is moving sideways after merging with its signal line in bullish zone. ROC is rising above its 10 day MA in bullish zone. RSI has just entered its overbought zone. Slow stochastic is moving sideways well inside its overbought zone.

Despite poor Q1 (Apr-Jun '20) corporate earnings and a likely contraction in GDP, analysts are projecting higher earnings two years forward to justify current stretched index valuations.

Small investors should remain wary, because no one really knows how long the pandemic will continue to devastate the already slowing economy and what corporate earnings will look like two years down the road.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs in long-term bull territory for the 8th straight week. The index moved above the psychological 11500 to its highest level in 6 months.

The 20 week and 50 week EMAs are moving up after forming bullish 'rounding bottom' patterns. The 200 week EMA is also moving up after forming a shallower saucer-like pattern. Bulls are gaining significant ground against bears.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line and has entered its overbought zone. RSI continues its gradual rise above its 50% level. Slow stochastic is moving sideways well inside its overbought zone.

Nifty's TTM P/E touched a new lifetime high of 32.92, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling sharply in neutral zone, hinting at some more near-term index upside.

Bottomline? Bulls are regaining control on Sensex and Nifty charts. Bears are clearly on the back foot - thanks to SEBI restrictions on short selling. Some more upside is likely. Stay on the sidelines and wait for better entry opportunities on dips.

Sensex, Nifty charts (Aug 21, 2020): bears give ground grudgingly as bulls try to charge ahead

noreply@blogger.com (Subhankar) — Sat, 22 Aug 2020 16:37:00 +0000

FIIs were net sellers of equity on Thu. Aug 20, but were net buyers of equity on the four other trading days. Their total net buying was worth Rs 20.68 Billion. DIIs were net sellers of equity on all five trading days. Their total net selling was worth Rs 21.17 Billion.

The Nomura India Business Resumption Index (NIBRI), a weekly tracker of the pace at which economic activity normalises, rose to 73.7 in the week ending on Aug 16 against 72.3 in the previous week. Though this indicated an improved momentum over the moderation in July, a rising spread of virus infections continued to hinder recovery.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows a tough fight for domination between bulls and bears near the 640 points downward 'gap' formed on Mar 6th.

On Mon. Aug 17th, the index dropped to the lower edge of the 'gap' intra-day but bounced up after receiving twin support from the (blue) up trend line and the 20 day EMA. The next day, the index rose to close above the 'gap' on the back of strong buying by FIIs.

Trading on Wed. Aug 19th was very interesting. The index rose above its previous (Jul 29) top of 38617 intra-day, but failed to close above it by a whisker. The next day, the index dropped back inside the 'gap' but found support from the up trend line. On Fri. Aug 21, the index just about managed to close above the 'gap' zone.

All three EMAs are now rising, and the index is trading above them in a bull market. The 'golden cross' (of the 50 day EMA above the 200 day EMA - marked by light blue circle) has technically confirmed a return to a bull market. But bears are refusing to give up the fight.

Daily technical indicators are looking bullish to neutral. MACD is moving sideways after merging with its signal line in bullish zone. ROC has merged with its 10 day MA, and is moving sideways in neutral zone. RSI is poised to enter its overbought zone. Slow stochastic has dropped to the edge of its overbought zone after re-entering it.

The Indian stock market is trying to track the rising US market, even though economic recovery may be far away. Since US stock indices are on the verge of new highs, expect Sensex to follow suit - at least as long as FIIs remain bullish.

However, the risk on the upside is increasing by the day. Watch out when the last of the bears throw in the towel and turn bulls. That is when a proper correction will happen. Till then, book partial profits, or ride the rally with trailing stop-losses.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs in long-term bull territory for the 7th straight week. After struggling for the past four weeks, it managed to close above the 'support-resistance' zone between 11000-11250.

The 20 week and 50 week EMAs are moving up after forming bullish 'rounding bottom' patterns. The 200 week EMA has formed a shallower saucer-like pattern. Bulls are regaining control after a brief hiatus.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and is headed towards its overbought zone. RSI is gradually rising above its 50% level. Slow stochastic is moving sideways inside its overbought zone.

Nifty's TTM P/E touched a new lifetime high of 32.09 on Wed. Aug 19 before slipping to 32.08, which remains deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone, and can limit near-term index upside.

Bottomline? Bulls appear to be regaining control on Sensex and Nifty charts. Bears are giving ground grudgingly. Some more upside can't be ruled out, but this isn't a good time to buy. Hold cash, stay on the sidelines and wait for better entry opportunities.

Sensex, Nifty charts (Aug 14, 2020): bears keep bulls on a leash

noreply@blogger.com (Subhankar) — Sat, 15 Aug 2020 15:29:00 +0000

FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 21.30 Billion. DIIs were net sellers of equity on all five trading days. Their total net selling was worth Rs 44.21 Billion.

India's CPI-based retail inflation rose to 6.93% in Jul '20 from 6.23% in Jun '20. CPI remained above 6% for the fourth straight month. Food inflation was 9.62%, thanks to supply disruptions. WPI-based wholesale inflation was -0.58% in Jul '20 against -1.81% in Jun '20.

After a US $790 Million trade surplus in Jun '20, India's trade deficit was US $4.83 Billion in Jul '20. Exports were down 10.21% to $23.64 Billion, while imports were down 28.4% to $28.47 Billion. Trade deficit was $13.43 Billion in Jul '19.

BSE Sensex index chart pattern

Note the following comment from last week's post on the daily bar chart pattern of Sensex: "Sensex needs to convincingly move above its Jul. 29th top of 38617 for the bullish pattern of 'higher tops, higher bottoms' to continue."

Despite FII buying throughout the week, the index tested but failed to move above 38617. On Fri. Aug 14, the index formed a 'reversal day' bar (higher high, lower close) and dropped to close near the lower edge of the 640 points downward 'gap' formed back on Mar 6th.

Should bulls be worried? Not yet. Though the index slipped below its 20 day EMA intra-day on Fri., it received support from the (blue) up trend line and bounced up. Remember that a trend line gets stronger with each successful test (unlike support/resistance levels, which get weakened with frequent tests).

The 'golden cross' (marked by light blue circle) of the 50 day EMA above the 200 day EMA is a technical confirmation of a return to a bull market. Does that mean bears have been vanquished, and all dips are buying opportunities?

Not quite. Sensex may be forming a small 'double top' reversal pattern that will be technically confirmed on a fall below the Aug 3rd low of 36911. In case the index does confirm the 'double top', the downward target will be 35250 (which just happens to fall inside the downward 'gap' formed back on Mar 12th).

Daily technical indicators are looking bullish to neutral. MACD is moving sideways after merging with its signal line in bullish zone. ROC has merged with its 10 day MA, and is moving sideways along its '0' line. RSI has dropped to its 50% level. Slow stochastic has dropped from its overbought zone after re-entering it.

Why are FIIs still buying after the index has already gained more than 45% from its Mar '20 low? One of the reasons may be the US Dollar index, which had peaked at 104 on Mar 23rd but is now languishing at 93. DIIs are clearly in profit-booking mode, and they have often outsmarted FIIs at or near market tops. So, caution is advised for those holding long positions.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs in long-term bull territory for the 6th straight week, but again failed to close above the 'support-resistance' zone between 11000-11250. Bear resistance forced a fourth weekly close inside the 'support-resistance' zone.

The 20 week and 50 week EMAs are moving up after forming bullish 'rounding bottom' patterns. The 200 week EMA has also started to move up. Bulls remain on top. However, failure of the index to close above the 'support-resistance' zone has kept bears in the game. A correction down to the 200 week EMA (at 10291) is possible.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and is well inside bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is sliding down inside its overbought zone.

Nifty's TTM P/E touched a new lifetime high of 31.42 on Thu. Aug 13 before slipping a bit to 31.09, which remains deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) dropped to the edge of its overbought zone, only to bounce up a little. Some more correction or consolidation is likely.

Bottomline? Counter-trend rallies on Sensex and Nifty charts have failed to move above resistance zones after re-entering bull territories. Bulls still have the advantage, but bears have kept them on a leash during the past four weeks. Time to book some profits.

Sensex, Nifty charts (Aug 07, 2020): bulls and bears reach a stalemate

noreply@blogger.com (Subhankar) — Sat, 08 Aug 2020 14:55:00 +0000

FIIs were net sellers of equity on Wed. Aug. 5, but were net buyers on the other four trading days. Their total net buying was worth a huge Rs 94.97 Billion - thanks to Bandhan Bank owner holding divestment on Mon. Aug 3. DIIs were net sellers of equity on all five trading days. Their total net selling was worth Rs 21.34 Billion.

The IHS Markit India Manufacturing PMI dropped to 46 in Jul '20 from 47.2 in Jun '20. (A reading below 50 indicates contraction.) It was the fourth straight month of contraction. The Services PMI was 34.2 in Jul '20 against 33.7 in Jun '20. The Composite (Mfg. + Serv.) PMI slipped to 37.2 in Jul '20 from 37.8 in Jun '20.

India's Consumer Confidence index plummeted to 53.8 in Jul '20, well below the 100 mark that represents the dividing line between optimism and pessimism. Inflation expectations of households are rising, which may be one of the reasons why RBI maintained status quo on interest rates at its Aug '20 MPC meeting.

BSE Sensex index chart pattern

Despite strong buying by FIIs, the daily bar chart pattern of Sensex failed to move above the 640 points downward 'gap' formed back on Mar 6th. Bears are putting up a strong last-ditch resistance.

On Mon. Aug 3, the index dropped to close below its 20 day EMA for the first time in more than two months. Bulls used the dip to buy - as they have been doing for more than four months.

The index closed just below the 'gap' on Tue. and Wed. (Aug 4 and 5), but entered and remained within the 'gap' during the next two days. The 50 day EMA is on the verge of crossing above the 200 day EMA - the 'golden cross' will technically confirm a return to a bull market.

Daily technical indicators are looking bullish to neutral. MACD is moving sideways below its signal line in bullish zone. ROC is below its 10 day MA, and moving sideways along its '0' line. RSI is falling towards its 50% level. Slow stochastic has bounced up a bit after falling towards its 50% level.

The (blue) up trend line - currently at 37000 - remains intact and untested for the past two months. Any breach of the trend line may be followed by a drop to the 200 day EMA (currently at 36050).

Sensex needs to convincingly move above its Jul. 29th top of 38617 for the bullish pattern of 'higher tops, higher bottoms' to continue. That should not be a problem if FIIs continue their buying.

After touching 103 in mid-March '20, the US Dollar index had been declining steadily, but has bounced up a little after finding a bottom at 92.5. A fall in the Dollar index may be partly responsible for FII flows into emerging markets. The flows can reverse if the Dollar index starts rising.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the fifth straight week, but failed to move above the 'support-resistance' zone between 11000-11250. Bear resistance forced a third weekly close inside the 'support-resistance' zone.

The 20 week and 50 week EMAs are moving up after forming bullish 'rounding bottom' patterns. Bulls have the upper hand. However, failure of the index to move above the 'support-resistance' zone has kept the door open for a correction down to the 200 week EMA (at 10282).

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and has entered bullish zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways well inside its overbought zone.

Nifty's TTM P/E has moved up to 30.72, a new lifetime high and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone, hinting at some more consolidation or correction.

Bottomline? Counter-trend rallies on Sensex and Nifty charts have stalled at resistance zones after re-entering bull territories. Bulls have the advantage, but bears are trying their best to hold them back. Stay invested, but avoid fresh buying.

Sensex, Nifty charts (Jul 31, 2020): a temporary pause or a trend reversal?

noreply@blogger.com (Subhankar) — Sat, 01 Aug 2020 15:02:00 +0000

FIIs were net buyers of equity on Tue. and Thu. (Jul. 28 and 30), but were net sellers on the other three trading days. Their total net selling was worth Rs 13.11 Billion. DIIs were net buyers of equity on Fri. Jul. 31, but were net sellers on the first four trading days. Their total net selling was worth Rs 24.45 Billion.

During Jul. '20, FIIs were net buyers of equity worth Rs 24.9 Billion - thanks to their strong buying during the week of Jul. 20-24. It was their third straight month of net buying. DIIs were net sellers of equity worth Rs 100.08 Billion during Jul. '20. It was their heaviest monthly selling since Mar. '19.

The index of eight core sector industries contracted 15% in Jun '20, compared with 22% in May '20 and 37% in Apr '20. During Q1 (Apr-Jun '20), the index contracted 24.6%. Only fertilisers showed 4% growth. The other seven (coal, crude oil, natural gas, refinery products, steel, cement, electricity) contracted between 6 to 34%.

Gross tax revenue shortfall of 32.6% during Q1 (Apr-Jun '20) widened India's fiscal deficit to Rs 6.62 Trillion, which is 83.2% of the Rs 7.96 Trillion budget estimate for FY 2020-21. This is the highest fiscal deficit in percentage terms since Q1 (Apr-Jun 1998)

BSE Sensex index chart pattern

An interesting tussle between bulls and bears is evident on the daily bar chart pattern of Sensex. Despite buying pressure from FIIs, bears continued their last-ditch resistance at the 640 points downward 'gap' formed back on Mar 6th.

On Tue. Jul. 28, the index closed above the 'gap' zone. However, formation of a 'reversal day' bar (higher high, lower close) on Wed. Jul. 29 provided a psychological boost to bears. The index corrected during the rest of the week, and closed just below the 'gap'.

What next? Technically, the balance remains tilted towards bulls. The index is trading above its three daily EMAs in bull territory. The up trend line - drawn through Mar '20 and May '20 lows - remains intact. The 50 day EMA is poised to cross above the 200 day EMA - the 'golden cross' will technically confirm a return to a bull market.

Bears are not out of the game yet. As per 'gap' theory, part or complete filling of a 'gap' is usually followed by a resumption of the trend prior to formation of the 'gap'. That means the down trend that started from Wed. Jul. 29 can continue.

On the downside, the wide range between 35700 (level of 50 day EMA) and 37200 (level of 20 day EMA) can provide good support. However, a convincing breach of the up trend line (at 36500) will confirm a trend reversal.

Daily technical indicators are in bullish zones, but starting to show downward momentum. MACD is moving sideways but has slipped below its signal line. ROC has crossed below its 10 day MA. RSI and Slow stochastic have dropped down from their respective overbought zones.

There is no rush to buy the dip. It is possible that the index will test support from the up trend line. Add if the index bounces up from trend line support. Book profits if the trend line gets breached.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the fourth straight week, but formed a weekly 'reversal' bar (higher high, lower close) that stalled the upward momentum of the rally from its Mar '20 low.

The index moved above the 'support-resistance' zone between 11000-11250 intra-week, but failed to sustain above 11250. Bear resistance forced a second weekly close inside the 'support-resistance' zone.

The 20 week EMA has crossed above the 200 week EMA after forming a bullish 'rounding bottom' pattern. The 50 week EMA is in the process of forming a 'rounding bottom' pattern. So, bulls have no reason to panic just yet. However, a test of support from the 200 week EMA (at 10273) may be on the cards.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line and has entered bullish zone. RSI is above its 50% level. Slow stochastic is well inside its overbought zone.

Nifty's TTM P/E has moved up to 30.2, a new lifetime high and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone, hinting at more consolidation or correction.

Bottomline? Counter-trend rallies on Sensex and Nifty charts have expectedly stalled at resistance zones after re-entering bull territories. The current dip may not be a buying opportunity. Sometimes, staying on the sidelines can be a good strategy.

Sensex, Nifty charts (Jul 24, 2020): relying too much on Reliance?

noreply@blogger.com (Subhankar) — Sat, 25 Jul 2020 14:52:00 +0000

FIIs turned bulls, and were net buyers of equity on all five trading days. Their total net buying was worth Rs 77.92 Billion. DIIs were net sellers on all five trading days, but couldn't keep pace with FII buying. Their total net selling was worth Rs 53.23 Billion.

Sensex gained almost 3% while Nifty gained nearly 2.7% on the back of strong buying by FIIs, who seem to have taken a particular fancy for RIL despite poor Q4 performance. A slew of international investment announcements into Jio platforms has made the company 'net debt free'.

A basket of penny stocks valued under Rs 5 - typically targeted by small retail investors - has outperformed the Sensex by a country mile. That is always a worrying sign for bulls.

BSE Sensex index chart pattern

The following comment was made in last week's post on the daily bar chart pattern of Sensex: "On the upside, resistance can be expected from a 640 points downward 'gap' formed on Mar 6th."

The index closed higher on Mon. Jul 20th, but formed a small 'doji' pattern that hinted at indecision among bulls and bears. An upward 'gap' opening on Tue. Jul 21 belied bearish hopes. The index entered and closed inside the 640 points downward 'gap' formed on Mar 6th.

For the next three days, Sensex consolidated sideways and closed within the 'gap' - nearly filling it, but failed to overcome last-ditch resistance put up by bears.

Daily technical indicators are in bullish zones. MACD is moving sideways after merging with its signal line. ROC is also moving sideways after merging with its 10 day MA. RSI is seeking support from the edge of its overbought zone. Slow stochastic is moving sideways inside overbought zone.

The up trend line - drawn through Mar '20 and May '20 lows - remains intact. A 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market. That seems a formality, now that FIIs have turned bulls.

If you have been waiting for a proper correction to enter, you may need to wait a little longer. If you were fortunate to enter the ongoing rally at lower levels, stay invested but maintain a trailing stop-loss to protect profits.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the third week in a row, and above the 11000 level for the first time since Mar 5 '20. Note the following comment from last week's post:

"On the upside, the 'support-resistance' zone between 11000-11250 can provide bullied bears a last opportunity to put up some resistance." The index tested the 11250 level during the week, and closed below 11200 inside the 'support-resistance' zone.

The 20 week EMA has crossed above the 200 week EMA after forming a bullish 'rounding bottom' pattern. The 50 week EMA is in the process of forming a 'rounding bottom' pattern.

Weekly technical indicators are looking bullish. MACD is rising above its signal line and is poised to enter bullish zone. RSI is gradually rising above its 50% level. Slow stochastic is moving sideways well inside its overbought zone.

Nifty's TTM P/E has moved up to 29.35, a lifetime high and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has started rising in neutral zone, and can trigger some more consolidation or correction.

Bottomline? Ongoing rallies on Sensex and Nifty charts have stalled at resistance zones after re-entering bull territories. The rallies appear overly dependent on a single stock - RIL. It's a little late to jump into the bull bandwagon. Stay on the sidelines, but maintain trailing stop-losses to protect profits.

Sensex, Nifty charts (Jul 17, 2020): bears getting bullied by Reliance bulls

noreply@blogger.com (Subhankar) — Sat, 18 Jul 2020 15:18:00 +0000

FIIs were net buyers of equity on Mon. and Fri. (Jul 13 and 17), but were net sellers on the other three days. Their total net selling was worth Rs 19.59 Billion. DIIs were net buyers on Thu. Jul 16, but were net sellers on the rest four days. Their total net selling was worth Rs 15.84 Billion.

Sensex and Nifty each gained about 1.2% for the week. Like in the previous week, the indices gained while FIIs and DIIs were both net sellers. Small investors who may have entered the market recently should learn the concept of a stop-loss - otherwise their 'paper' profits can vanish in a hurry.

India's usual trade deficit turned into a surplus in Jun '20 for the first time since Jan '02. Exports contracted 12.4% to US $21.9 Billion; imports contracted 47.6% to $21.1 Billion - leaving a surplus of about $800 Million. The sharp drop in imports indicates a slump in domestic demand.

BSE Sensex index chart pattern

For the second week in a row, the daily bar chart pattern of Sensex spent the entire trading week above its three daily EMAs in bull territory. On Tue. Jul 14, the index broke out below the 'rising wedge' pattern, only to pullback along the lower trend line of the 'wedge' during the rest of the week.

Note that the larger up trend line - drawn through the Mar '20 and May '20 lows remains intact. Only a downward breach of this trend line can bring bears back into the game. On the upside, resistance can be expected from a 640 points downward 'gap' formed on Mar 6th.

Daily technical indicators are in bullish zones. MACD is moving sideways after merging with its signal line. ROC is trying to cross above its 10 day MA. RSI has re-entered its overbought zone. Slow stochastic is about to follow suit.

All four indicators are showing negative divergences by failing to rise higher with the index, which closed at its highest level in 4 months. The index has rallied almost 11500 points (45%) from its Mar 24th low, even as the country is being ravaged by a pandemic.

The disconnect between a bullish market that has gained mainly on the back of a single stock (RIL), and the grim reality of an economy falling into a recession is staggering. It will take a long time for the economy to recover and corporate earnings to get back on track.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs for the second straight week, and above the 10900 level for the first time in 4 months. Two gaps got filled in the process - the downward 'gap' of week ending Mar 13th, and the upward 'gap' formed last week.

The 20 week EMA has formed a bullish 'rounding bottom' pattern and is poised to cross above the 200 week EMA. On the upside, the 'support-resistance' zone between 11000-11250 can provide bullied bears a last opportunity to put up some resistance.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line in bearish zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI is slowly rising above its 50% level. Slow stochastic is moving sideways well inside its overbought zone.

Nifty's TTM P/E has moved up to 28.55, its highest level for the month and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is hovering in neutral zone, and may limit near-term index upside.

Bottomline? Ongoing rallies on Sensex and Nifty charts have overcome important resistance levels and re-entered bull territories. There are clear signs of 'distribution' from strong to weaker hands. Caution is advised.

Sensex, Nifty charts (Jul 10, 2020): bulls looking tired after long rallies

noreply@blogger.com (Subhankar) — Sat, 11 Jul 2020 15:32:00 +0000

FIIs were net buyers of equity on Mon., Tue. and Thu. (Jul 6, 7 and 9), but were net sellers on the other two days. Their total net selling was worth Rs 6.35 Billion. DIIs were net buyers on Mon., but were net sellers on the next four days. Their total net selling was worth Rs 26.09 Billion.

Sensex and Nifty each gained 1.5% for the week even as FIIs and DIIs were both net sellers. So, who were the buyers? It was you and me - a sign of 'distribution' by the big boys.

India's IIP (Index of Industrial Production) contracted 34.7% in May '20 - an improvement over 57.6% contraction in Apr '20, reflecting gradual resumption of manufacturing activity.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex spent the entire trading week above its three daily EMAs in bull territory for the first time since Jan '20. However, all may not be well, as the past five weeks of trading has formed a bearish 'rising wedge' pattern. A downward breakout from such a pattern is more likely.

Daily technical indicators are in bullish zones, but beginning to show downward momentum. MACD is sliding towards its signal line. ROC is about to cross below its 10 day MA. RSI looks poised to slip down from its overbought zone. Slow stochastic has started to move down inside its overbought zone.

All four indicators showed negative divergences by failing to rise higher with the index. A flood of short-term liquidity triggered an index rally of more than 40% from its Mar 24th low. The risk on the upside is increasing.

There appears to be some thaw in the frozen border relations with China - a country notorious for its 'two steps forward, one step back' approach to its border relations with 14 different countries. Agreeing to form 'buffer zones' inside Indian territory - as per reports - is equivalent to falling prey to China's nefarious designs.

The Covid 19 virus continues to flourish - particularly in cities - as WHO has acknowledged airborne spread. Some factories that had opened up are facing a spike in new positive cases. Several hundred air travellers have been afflicted.

Q1 (Jun '20) results are expected to be a disaster. With FIIs and DIIs in sell mode, the rally from the Mar '20 low may have run its course. There may not be a sharp crash. A more gradual consolidation-cum-downward slide is likely.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty formed a 45 points upward 'gap' to hop above its 50 week EMA, and closed above its three weekly EMAs for the first time since Feb 20th, gaining 160 points (1.5%) on a weekly closing basis. Bulls need to be wary, as the 'gap' can turn out to be an 'exhaustion gap'.

The index has moved 200 points above the 61.8% Fibonacci retracement level of 10550. However, it failed to close above the 76 points downward 'gap' that formed in the week ending on May 13th - though the 'gap' was filled.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside bearish zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI is slowly rising above its 50% level. Slow stochastic is well inside its overbought zone, but its upward momentum has stalled.

Nifty's TTM P/E has moved up to 28.27, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone, and can limit near-term index upside.

Bottomline? Ongoing rallies on Sensex and Nifty charts have overcome important resistance levels. Short-term liquidity flows gave bulls the upper hand. Now there are signs of 'distribution' from strong to weaker hands. Corrective moves can happen at any time.

Sensex, Nifty charts (Jul 03, 2020): bulls on the verge of regaining control

noreply@blogger.com (Subhankar) — Sat, 04 Jul 2020 14:38:00 +0000

For the second straight month, FIIs and DIIs were both net buyers of equity, which explains the strong rallies on Sensex and Nifty charts. However, the net buying reduced considerably - to Rs 54.93 Billion (Jun '20) from Rs 139.14 Billion (May '20) for FIIs; and Rs 24.34 Billion (Jun '20) from Rs 122.93 Billion (May '20) for DIIs.

India's Manufacturing PMI rose sharply to 47.2 in Jun '20 from 30.8 in May '20. Services PMI improved to 33.7 in Jun '20 from 12.6 in May '20. The Composite (Mfg. + Serv.) PMI rose to 37.8 in Jun '20 from 14.8 in May '20. All the numbers were below 50 - indicating contraction.

Automobile sales were disappointing in Jun '20 on a YoY basis. Maruti, Hyundai, Toyota, M&M showed 50-60% sales decline. Two-wheeler sales declined 25-35%. CV segment remained under extreme stress. Only tractor sales showed growth.

BSE Sensex index chart pattern

The bulls are gradually regaining control of the daily bar chart pattern of Sensex. After completely filling the downward 'gap' formed on Mar 12th, the index has moved above its 200 day EMA and the 61.8% Fibonacci retracement level of 35920 into bull territory.

Bears are on the back foot - thanks to net buying by FIIs and DIIs. But they haven't thrown in the towel yet. Why? Because the index has formed a bearish 'rising wedge' pattern during the past four weeks. The likely breakout from such a pattern is downwards.

Daily technical indicators are in bullish zones, but starting to look overbought. MACD is moving sideways in bullish zone along with its merged signal line. ROC has dropped to seek support from its 10 day MA. RSI and Slow stochastic are rising inside their respective overbought zones.

All four indicators are showing negative divergences by failing to rise higher with the index. Remember that a flood of short-term liquidity can overcome technical headwinds. However, the index has already gained more than 40% from its Mar 24th low. It may be better to err on the side of caution.

A global economic recession is looming ahead. India will not be spared. Periodic announcements - like several investments in Jio and launching of virus vaccines by different companies - have stoked bullish sentiment. That may not be able to sustain the rally much further.

Timely profit booking is a discipline that should be followed by small investors. You only make money when you sell at a profit.

NSE Nifty index chart pattern

For the third week in a row, the weekly bar chart pattern of Nifty closed above its 200 week EMA in long-term bull territory, gaining almost 225 points (2.2%) on a weekly closing basis.

The breach of the 200 week EMA is a bullish sign. The index has closed above an important resistance level - the 61.8% Fibonacci retracement level of 10550. However, the zone (10610-10750) between the 50 week EMA and the 76 points downward 'gap' formed in the week ending on May 13th may provide stronger resistance.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside oversold zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI has moved above its 50% level. Slow stochastic is well inside its overbought zone. Caution is advised as the upside risk is increasing.

Nifty's TTM P/E has moved up to 27.78, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone. Near-term index upside may be limited.

Bottomline? Ongoing rallies on Sensex and Nifty charts are gradually overcoming important resistance levels. Short-term liquidity flows have given bulls the upper hand. Bears are not out of the game. Be prepared for corrective moves at any time.

Sensex, Nifty charts (Jun 26, 2020): 3 months long rallies losing momentum?

noreply@blogger.com (Subhankar) — Sat, 27 Jun 2020 14:28:00 +0000

FIIs were net sellers of equity on Thu. and Fri. (Jun 25 and 26) but were net buyers during the first three trading days. Their total net buying was worth Rs 5.56 Billion. DIIs were net buyers of equity on Tue. and Fri. (Jun 23 and 26), but were net sellers during the three other days. Their total net selling was worth Rs 13.1 Billion, as per provisional figures.

According to a report by S&P Global Ratings, India's economy is in deep trouble. Inability to contain the Covid 19 virus, an anaemic policy response, underlying vulnerabilities, particularly in the financial sector can lead to a contraction in GDP growth by 5% during FY 2020-21.

Despite some of the worst macroeconomic fundamentals in recent memory, millions of new investors with no previous trading history have been piling into Asian stock markets. It is time to remain circumspect.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex consolidated sideways with a slight upward bias, spending four of the five trading sessions inside the downward 'gap' that had formed back in Mar 12th.

On Tue. Jun 23, the index closed above the 'gap' for the first time in more than 3.5 months. Partial or complete filling of a downward 'gap' is usually followed by a resumption of the down trend.

On Wed. Jun 24, the index rose higher to test resistance from the sliding 200 day EMA but dropped back inside the 'gap' - forming a reversal day bar (higher high, lower close) that often marks an intermediate top.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways in bullish zone along with its merged signal line. ROC is moving sideways above its 10 day MA. RSI is moving down towards its 50% level. Slow stochastic has slipped down from its overbought zone.

The present government has proved quite incapable of either managing the economy or the rapid spread of the Covid 19 virus. Now the China threat along India's border is being mismanaged by resorting to obfuscation and jingoism.

A flush of liquidity helped in boosting three months long rallies in global stock markets. A handful of stocks have led the rally in India, with RIL doing most of the heavy lifting. Any breach of the up trend line from the Mar 24th low can trigger a sharp correction.

NSE Nifty index chart pattern

For the second week in a row, the weekly bar chart pattern of Nifty closed above its 200 week EMA in long-term bull territory, gaining about 138 points (1.35%) on a weekly closing basis.

The breach of the 200 week EMA is a bullish sign. However, there are three overhead resistance levels - the 61.8% Fibonacci retracement level of 10550, the 50 week EMA (at 10610) and the 76 points downward 'gap' formed in the week ending on May 13th. The zone between 10550-10750 may provide strong resistance.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside oversold zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI has just moved above its 50% level. Slow stochastic has entered its overbought zone. Near-term index upside seems limited.

Nifty's TTM P/E has moved up to 26.67, its highest level for the month and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone. Some near-term index consolidation or correction is possible.

Bottomline? Bear market rallies on Sensex and Nifty charts are close to important resistance levels. Short-term liquidity flows may have given the impression that all is well with the economy and the stock market. Both indices look ripe for corrective moves.