Sensex, Nifty charts (Dec 28, 2018): trading within bearish rising wedge patterns

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In a holiday-shortened trading week, FIIs were net sellers of equity on Mon. & Fri. (Dec 24 & 28), but net buyers on Wed. & Thu. (Dec 26 & 27). Their total net buying was worth Rs 11.1 Billion. DIIs were net buyers of equity on Mon. & Fri., but net sellers on Wed. & Thu. Their total net buying was worth Rs 5.85 Billion, as per provisional figures.

India’s fiscal deficit during Apr-Nov ’18 touched Rs 7.16 Trillion, which is 114.8% of full year target. During Apr-Nov ’17, fiscal deficit was 112% of full year target. No wonder RBI is being pressurised to part with a portion of its reserves to help trim the deficit.

Reports that the government would inject Rs 286 Billion through recapitalisation bonds for 7 PSU banks to help them come out of RBI’s PCA framework brought some bullish cheer to PSU bank stocks.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex closed above its three EMAs in bull territory with a 1% gain for the week. The index had dropped below its three EMAs to touch an intra-day low of 35011 on Dec 26, but formed a ‘reversal day’ bar (lower low, higher close) – just as it had done a fortnight earlier – and bounced up.

Will the ‘Santa rally’ continue next week? For the past 11 weeks, the index has been trading within a bearish ‘rising wedge’ pattern, from which a downward breakout is expected. So, bulls should keep their enthusiasm in check.

Daily technical indicators are looking bullish to neutral. MACD is oscillating about its signal line in bullish zone. ROC has slipped below sliding 10 day MA in neutral zone. RSI is oscillating about its 50% level. Slow stochastic has fallen from its overbought zone, but showing a bit of upward momentum.

Q3 (Dec ’18) results of India Inc. will start hitting the market around mid-Jan ’19. Results are not expected to be much better than in Q2 (Sep ’18). 

US-China trade war, possible BrExit-led recession, likely slowdown in global growth, general elections in India are near-term concerns for the stock market. Be very choosy in what you buy.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty has been trading within a bearish ‘rising wedge’ pattern for the past 11 weeks. The likely breakout from the ‘wedge’ is downwards.

The Fibonacci support zone should provide near-term support. However, a fall towards the 200 week EMA can’t be ruled out, if US-China trade talks do not yield expected results.

Weekly technical indicators are turning bullish. MACD is merging with its signal line in bearish zone. RSI is moving up towards its 50% level. Slow stochastic has crossed above its 50% level. ROC is about to enter its overbought zone

Nifty’s TTM P/E has moved up to 26.16, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped deep inside its overbought zone, and can trigger a correction.

Bottomline? Sensex and Nifty charts are consolidating within bearish ‘rising wedge’ patterns. Likely breakouts from such patterns is downwards. Expect both indices to touch lower levels before they can rise to touch new highs in 2019. 

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