Saturday 7 July 2018

Sensex, Nifty charts (Jul 06, 2018): bears stand firm against bull onslaught

FIIs were net sellers of equity during all five trading days last week. Their total net selling was worth Rs 36.6 Billion. DIIs were net sellers on Thu. Jul 5 but net buyers on the other four days. Their total net buying was worth Rs 24.4 Billion, as per provisional figures.

Indian engineering exports have grown by nearly 20% during Apr-May '18 even as the US-China tariff war has spread to key trading markets in Europe, Canada and Mexico, as per an EEPC statement.

Agri experts and activists from Maharashtra have criticised the government for its 'false and misleading' claim that the MSP of kharif crops have been hiked by 50%.

Yes Bank has forecast the recently announced increase in minimum support prices (MSP) for kharif (summer-sown) crops will add 35 bps (0.35%) incrementally to headline inflation during FY 2018-19.

BSE Sensex index chart pattern



The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "The rising 200 day EMA shows that the long-term chart structure remains bullish. The down trend line, which has dominated the chart for the past 5 months, shows that bears are not ready to give up their near-term advantage."

Other than the fact that Sensex gained about 0.7% on a weekly closing basis - erasing most of the previous week's loss - nothing much has changed on the chart technically.

Bulls made another attempt to make the index breach the down trend line but failed as bears stood their ground. The index closed above its three daily EMAs in bull territory.

Daily technical indicators are looking neutral to bullish. MACD is facing resistance from its sliding signal line in bullish zone. ROC is falling towards its 10 day MA in neutral zone. RSI is in neutral zone, but not showing any upward momentum. Slow stochastic has risen to the edge of its overbought zone.

The index appears to be waiting for some trigger to make a decisive move. May be Q1 (Jun '18) results will show some earnings growth from India Inc. Auto and FMCG earnings should show improvement. 

The tariff war unleashed by Trump, high oil prices, a falling Rupee against the US Dollar, continuous FII selling are not making market sentiment conducive for bulls despite good inflows into domestic mutual funds.

Stay invested, and wait for opportunities to present themselves. The forthcoming IPO from HDFC AMC should be a good long-term investment opportunity. 

NSE Nifty index chart pattern



For the 4th straight week, the bar chart pattern of Nifty faced strong resistance from the down trend line. For the 2nd week in a row, the index dropped below the 33 points downward 'gap' (formed on Feb 5) but received support from its rising 20 day EMA.

Nifty closed above its two rising weekly EMAs in a bull market. However, for the past 23 weeks it has closed below the down trend line.

Weekly technical indicators are in bullish zones, but not showing any upward momentum. MACD is moving sideways just above its signal line. RSI and Slow stochastic are sliding down inside their respective overbought zones. ROC has crossed below its 10 week MA and falling towards neutral zone. 

Nifty's TTM P/E has moved up to 26.62 - which is well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some more consolidation around current levels.

Bottomline? Bears are strongly defending down trend lines on Sensex and Nifty charts. For the 4th straight week, bulls have failed to budge them. Some more consolidation or correction is likely. Wait for clear trends to emerge. Long term trends continue to remain up. 

(Note: Don’t worry too much about index fluctuations! Learn how to choose fundamentally strong mid-cap and small-cap stocks. Become a paid subscriber of my Monthly Investment Newsletter today. A limited number of new subscriptions are being offered till Jul. 21, 2018. Contact me for details: mobugobu@yahoo.com.) 

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