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Sensex, Nifty charts (Aug 24, 2018): bull rallies losing steam?

In another holiday-shortened trading week, FIIs were net buyers of equity on Tue. & Thu. (Aug 21 & 23), but net sellers on Mon. & Fri. (Aug 20 & 24). Their total net buying was worth Rs 1.3 Billion. DIIs were net buyers of equity on all four trading days. Their total net buying was worth Rs 18.4 Billion, as per provisional figures.

According to Moody's, India's current account deficit (CAD) will widen to 2.5% of GDP in FY 2018-19 due to higher Oil Prices and Rupee depreciation. Nomura expects India's CAD to widen to 2.8% of GDP due to rising oil prices, a depreciating Rupee and outflow of foreign portfolio investments.

A Dun & Bradstreet report expects the rise of bank lending rates in general and borrowing cost in specific can dampen India's industrial production and revival in domestic demand.

BSE Sensex index Chart pattern

The daily bar chart pattern of Sensex touched a new high of 38488 on Thu. Aug 23, but slipped a bit by the end of the week. The index gained 300 points (0.8%) on a weekly closing basis.

Sensex appears to be trading within an upward-sloping channel for the past two months, and is above its three rising EMAs in a bull market. Despite touching a new high, the index failed to move up towards the upper edge of the trading channel.

Daily technical indicators are giving mixed signals. MACD has merged with its signal line and moving sideways near the edge of its Overbought zone. RSI has re-entered its overbought zone. ROC has crossed below its falling 10 day MA in bullish zone. Slow stochastic has started to correct after making multiple tops inside its overbought zone.

All four indicators are showing negative divergences by failing to touch new highs with the index. Some correction or consolidation seems likely.

Go through the annual reports of companies that have declared good Q1 (Jun '18) results on YoY and QoQ basis, and make a short-list of the best performers regardless of market-cap. Use the next dip to start adding a few short-listed stocks to your portfolio for the long-term.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new high of 11621 and gained 86 points (0.75%) on a weekly closing basis. The index is trading well above its two weekly EMAs in a bull market.

Nifty has been trading within an upward-sloping channel for the past two months, and closed higher for the fifth straight week. On the previous such occurrence during Mar-Apr '18, a period of sideways consolidation had followed.

Weekly technical indicators are looking overbought. MACD and RSI rose higher with the index. ROC and Slow stochastic showed negative divergences by moving sideways.

A likely correction or consolidation will improve the technical 'health' of the chart - enabling the index to rise higher.

Nifty's TTM P/E has corrected a bit to 28.06, but remained well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is oscillating above its overbought zone, and can limit index upside.

Bottomline? Bulls are maintaining control of Sensex and Nifty charts. Overbought conditions and divergences on technical indicators can trigger some correction or consolidation. Macro headwinds like high oil prices, a depreciating Rupee, a widening trade deficit, US-China tariff war may keep bullish sentiments subdued. Stay invested but avoid new stock ideas near a market top.

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

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Sensex, Nifty charts (Aug 24, 2018): bull rallies losing steam?


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