mercurial/context.py

--- a/mercurial/context.py	Thu Aug 16 16:53:48 2018 +0300
+++ b/mercurial/context.py	Thu Aug 16 16:59:40 2018 +0300
@@ -1896,7 +1896,7 @@
         components = path.split('/')
         for i in pycompat.xrange(len(components)):
             component = "/".join(components[0:i])
-            if component in self.p1():
+            if component in self.p1() and self._cache[component]['exists']:
                 fail(path, component)
 
         # Test the other direction -- that this path from p2 isn't a directory