India’s Nifty 50 is trading in the red, but is defending the 50-hour EMA 10,445.
The bullish hammer reversal confirmed on Friday indicates scope for a corrective rally toward 10,700-10,800 in the next few days.
Therefore, I would be a buyer on the dips. The bullish outlook would be invalidated if the index closes today below the downward sloping 5-day EMA.
Positive RSI divergence + bullish symmetrical triangle breakout signals potential for rally to 245-250 levels. The second quarter revenue has failed to meet expectations…EPS adjusted came-in at $3.95 vs. $3.51 expected.
Better-than-expected EPS is good news. Stay on the long side as long as the prices stay above 221 levels.
An end of the day close above the wedge would revive the larger uptrend and push the index to fresh record highs… to 2500 levels.
The trend line has come to the rescue again… but the RSI is overbought and has been so for the major part of last 8 months… It was last overbought in 2013.
Markets are cheering Yellen’s slightly dovish take on interest rates, however, once again what is being ignored is the reverse QE = Balance Sheet runoff.
Weekly chart – Multiple candles with long upper/lower shadows signals indecision at record highs. The rising trend line coming from Feb 2016 low & June 2016 low is seen offering support at 21,310-21,300 levels. If breached, it would signal the index has topped out at least for the short-term.
However, don’t bet on the short side if the index breaches the rising trend line via sideways action…
FTSE 100 weekly chart
Rejection at 5-MA followed by a break below weekly low of 7344 is likely to yield a pull back to 7290 (161.8% Fib ext.). A weekly close below 7290 would signal the index has topped out.
Stops could be place above 7360 (very tight stop).
Deutsche Bank described today’s US NFP and wage growth numbers as a ‘classic risk-on’ data, however the trend line hurdle is capping gains. Take note of the fact that the index closed below the trend line yesterday. I would go short on the index if the failure at the trend line is followed by a break below the session low of 2407.
Head and Shoulders breakdown and rising bond yields to weigh over stocks…
50-DMA support of 2413.72 is lined up just below the trend line. A daily close below the same would signal the index has topped out. The index could then proceed to test demand around 2375-2322.