In this post I will discuss chart patterns of major indices using monthly charts and will present my technical analysis on where i believe they are headed in times to come. This post includes my analysis of the Nifty, BankNifty, USD/INR, NSE NiftyIT index
In my earlier post in March of last year, I had stated that I was expecting Nifty to hit 11000 in 2017. Even after Demonetization, when markets were in a free fall I had struck to my conviction that we will eventually rebound to hit all time highs in 2017.
So now here is how the chart of Nifty50 index looks on monthly time frame-
- The Index has been in an up channel for last 8 years.
- We got a massive 2000+ point rally when the Nifty touched the lower end of the channel last Feb.
- The fall from the highs of last September of 8960 to low of 7893 in December was just a normal 50% retracement of the preceding rally.
#Nifty completed 50% retracement of upmove from 6826 to 8969 yesterday. Had a good rally today. Promising signs.
— Sumit Sethi (@Sethinomics) December 27, 2016
- If we study the MACD indicator, the MACD histogram on both weekly and monthly time-frames is now positive.Thus, a lead indicator giving a bullish crossover on longer term charts makes me optimistic of further upside to come.
- If we focus on the Nifty chart from 2015, it looks like forming an inverted Head & Shoulders pattern between 9119 & 6826 with the neckline formed by joining 9119 & 8970-the tops of 2015 & 2016. So once we get a breakout above this, it will open further 2300 point upside for the nifty, taking it to around 11,200 by year end.
- The Dollar seems to be topping out on charts. The USD/INR has made a double top around 69 on monthly charts with bearish MACD divergences. Even the MACD histogram is negative on both weekly and monthly time-frames.
- I believe the first target should be arund major support level of 66 and eventually we should see 63 for the USD/INR by year end.
USD/INR has made a double top around 69 on monthly charts. I believe it can head back to 63-64 this year. pic.twitter.com/DsNg78RDrt
— Sumit Sethi (@Sethinomics) January 17, 2017
- Even the Dollar Index, which hit 13 yr highs recently, has been making bearish MACD divergences on weekly and monthly charts, giving early signs of topping out. I believe a decisive break below 100 should take the index back towards 92 by year end.
Looking at charts and also assuming that the RBI will continue to defy common logic and will not deliver any major interest rate cuts while on the other hand the US FED will continue to over promise and under deliver on rate hikes there is a strong case for Rupee appreciation even if most big brokerages are projecting a weaker Rupee.
NSE NiftyIT Index-
NSE NiftyIT index chart. I believe it makes sense to buy big IT stocks only on breakout abv 11000.Otherwise,if 9300 breaks,even more trouble pic.twitter.com/PSE9IRPIau
— Sumit Sethi (@Sethinomics) January 27, 2017
I have been bearish on IT stocks for a long time.However, they have fallen a lot and the index has important support around 9300. However I don’t see any signs trend of reversal yet. I believe this sector, especially the BIG4, will continue to under-perform the markets. I’ll get bullish only if the IT index gets past 11000. Even a stronger rupee would not bode well for the prospects of this sector.
- The BankNifty index has also formed a similar inv H&S pattern as the Nifty.
BankNifty is breaking out of 2 year consolidation b/w 13400 & 20000 giving upside tgt of minimum 26600. I am extremely bullish. pic.twitter.com/Fptw0lP3fc
— Sumit Sethi (@Sethinomics) February 3, 2017
- For the first time, the BankNifty index has given a weekly closing above 20000 for two successive weeks.
- The index has however never closed above 20000 on monthly basis. Hence, the next few days are very critical . If 20000 sustains, it will open upside for tgts as high as 26600 for this year.
- Even the MACD and ADX indicators look encouraging on weekly and monthly charts, which make me believe that a lot more upside is there to come in the banking index in near future.
I continue to remain invested in stocks with the belief that 2014 was just a trailer, and the mega bull-market for Indian stocks is just starting now in 2017.
Disclaimer- Views Biased. Blog for informative purposes and does not constitute investment advice. Read full disclaimer here