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Nifty chart: a midweek technical update (Oct 25 ‘17)

The Finance Minister's announcement yesterday about a recapitalisation scheme for PSU banks energised FIIs no end. Their net Buying in equities touched a huge Rs 35.8 Billion today - completely overwhelming DII net selling in equities worth Rs 1.6 Billion.

Nifty formed a small upward 'gap' and touched a new intra-day high of 10341 before closing just below 10300. (Sensex - not shown - closed above 33000 for the first time ever.)

The government has collected over Rs 920 Billion as GST in Sep '17. The number of registered GST assesees have crossed 10 million but so far, less than half have paid taxes.

The daily bar chart pattern of Nifty touched lifetime intra-day and closing highs today as FIIs went on a buying spree - particularly in PSU banks.

Small investors would do well to avoid jumping on to the bull bandwagon now. Market breadth was negative today as declining stocks outnumbered advancing stocks.

Daily technical indicators are looking overbought. ROC (not shown), RSI and Slow stochastic are showing negative divergences by touching lower tops as the index rose higher. 

The index formed a bearish 'hanging man'-like candlestick pattern today. The sharp volume surge today (not shown) may be a sign of 'buying climax'.

The index is trading well above its three rising EMAs in a Bull Market. A bull market is supposed to climb a wall of worries. Just because an index has touched a new high doesn't mean it can't go even higher. However, buying at a market top can be a ticket to disaster.

Nifty's TTM P/E has risen to 26.63 - much higher than its long-term average. Q2 (Sep '17) results of India Inc. declared so far are not showing much improvement over Q1 (Jun '17). That means index valuation will remain high till Q3 (Dec '17).

The breadth indicator NSE TRIN (not shown) has dropped like a stone inside its overbought zone, and may limit further index upside.

FII buying may have been triggered by short-covering in PSU banks. It remains to be seen if buying momentum is sustained on F&O expiry day tomorrow (Oct 26).

Booking partial profits, and getting rid of non-performers may be a very good idea.

This post first appeared on Stock Market Charts | India Mutual Funds Investmen, please read the originial post: here

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Nifty chart: a midweek technical update (Oct 25 ‘17)


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