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