Nifty chart: a midweek technical update (Jan 09, 2019)


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FIIs were net sellers of equity on Tue. (Jan 8), but net buyers on Mon. & Wed. (Jan 7 & 9). Their total net buying was worth Rs 4.6 Billion. DIIs were net sellers on Mon. but net buyers on Tue. & Wed. Their total net buying was worth Rs 9.9 Billion, as per provisional figures.

According to a World Bank report, global economic growth is projected to soften from a downwardly-revised 3% in 2018 to 2.9% in 2019 amid rising downside risks.

The bull party may be coming to an end. Indian stocks are headed for another tough year as a shrinking global cash pool dims prospects of an improving economy and expected recovery in company earnings – according to BofAML. 


After closing below its three EMAs in bear territory on Thu. Jan 3, the daily bar chart pattern of Nifty formed a ‘reversal day’ bar (lower low, higher close) on Fri. Jan 4, which triggered four straight days of higher closes.

The index has moved above its 20 day SMA (middle Bollinger Band – marked by dotted green line) and closed above its 50 day and 200 day EMAs in bull territory.

However, today’s trading has formed a ‘hanging man’ candlestick pattern that can bring the four day rally to a close. Those holding long positions may want to book partial profits.

Daily technical indicators are turning bullish. MACD is forming a small ’rounding bottom’ pattern below its signal line in bullish zone. RSI and Slow stochastic have moved above their respective 50% levels. 

Note that MACD, RSI and Slow stochastic are showing negative divergences by forming bearish patterns of ‘lower tops, lower bottoms’.

Nifty’s TTM P/E has moved up to 26.15 – which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone – hinting at limited index upside.

Small investors should carefully track Q3 (Dec ’18) results that are being announced from this week onwards. Think of buying only those stocks that show visible earnings growth.

(NoteMid-cap and small-cap stocks have been badly beaten down. Thinking of adding some  of them to your portfolio? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers till Jan 21, 2019. Contact me at mobugobu@yahoo.com for details.)

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