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Nifty chart: a midweek technical update (Feb 14, 2018)

FIIs were net sellers of equity worth Rs 15.4 Billion during Mon. Feb 12 and Wed. Feb 14 (Feb 13 was a holiday). DIIs were net buyers of equity worth Rs 11.9 Billion, as per provisional figures, but were net sellers today.

The Index of Industrial Production (IIP) at 7.1% showed good growth in Dec '17, but was lower than 8.8% in Nov '17. Low base effect was partly responsible for the growth. However, IIP was only 3.7% during Apr-Dec '17, compared to 5.1% during Apr-Dec '16.

India's retail (CPI) inflation fell a little to 5.07% in Jan '18 against 5.21% in Dec '17, as food inflation softened.

The following comments appeared in the previous midweek technical update on Nifty: "The 33 points downward 'gap' formed on Mon. Feb 5 can act as a resistance zone for future up moves. Also, any attempt to rally by the index will induce profit-booking by investors wishing to lock-in tax-free LTCG till Mar 31 '18."

The 'gap' is looming like a dark cloud for bulls. The 6 days of trading - after formation of the 33 Points Downward 'gap' on Feb 5 - has not only occurred below the 'gap' but also below the sliding 50 day EMA.

The falling 20 day EMA has slipped below the 'gap' today, and can also act as a resistance to any near-term rally. A re-test, and possible breach, of the Feb 6 intra-day low of 10276 seems quite likely.

Daily technical indicators are in bearish zones. MACD is showing downward momentum. RSI and Slow stochastic are moving sideways - hinting at more index consolidation below the 50 day EMA.

Nifty's TTM P/E has inched up to 25.37 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating at the edge of its oversold zone - hinting at some more consolidation or correction. 

Near-term bearish sentiment is increasing by the day as misfortunes keep befalling the market. First came the shock of the 10% LTCG tax. Then, news of Indian exchanges stopping data services to overseas stock exchanges in a misguided effort to tie down FIIs from fleeing.

Today's news of a Rs 110 Billion fraud involving at least four banks may be the proverbial straw that will break the camel's (FIIs?) back. [Warren Buffett had once commented: "There's never just one cockroach in the kitchen" about a scandal in Wells Fargo bank].

Small investors need not panic. Don't stop your SIPs. But refrain from bottom fishing because Nifty is nowhere near bottoming out yet.

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 (Feb 14, 2018)


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