Update for the week ending – 27th July 2014

Update for the week ending – 27^th July 2014.

 Nifty Weekly Technical Analysis:

The Nifty took support at 7400 and bounced back to the 7800 mark during the week. The index failed to close above 7800 in Friday’s trade while foreign markets also closed in the red on Friday. Successive daily closings above 7800 could trigger further short covering, while a key risk looks to be the dollar index which bounced back from sub 80 levels and is trading near 81, which along with falling global markets is suggesting a flight to safety – in addition, the defensives such as IT, Pharma and FMCG indices also rose last week. The MACD histogram continues to weaken and we may see a bit of volatile sessions going ahead. FII index futures data shows that they have increased long positions during the week. Important supports lie at 7400, 7200. Closing below that zone will open the range till 6800.  

CNX MIDCAP Index: Momentum reading on the 14 week RSI has deteriorated considerably over the last few weeks while MACD divergence has also weakened during this time. These remain key risks in the short term; however the long term remains positive as long as 9800-9900 holds. The RS line below failed to cross above its previous highs which suggests muted performance vis-à-vis the Nifty.

CNX Small Cap Index: The index held support 5000 levels. The RS line is pointing down and failed to cross above its previous highs suggesting relative underperformance vis-à-vis the Nifty while slowing momentum as per the 14 week RSI weakening MACD are key risks. Key supports are 5000 and 4600.

CNX Auto: A Flattish RS line suggests that the Auto index might perform poorly vis-à-vis the Nifty, this is also evident from the price action of last 2 weeks as the Auto index did not participate much in the upside. For the near term one should be cautious as MACD is weakening after such a run-up, Supports for the index lie at 6500 and 6000.

CNX Bank Nifty: The index is facing considerable resistance near the 15,700 area and as highlighted the previous week- underperformance against the Nifty is likely as the RS line is pointing down and tests its 40 week MA. The momentum reading on the 14 week RSI has fallen below its pre-election run up readings and the MACD almost is at a sell signal, 14000 and 13000 remain critical supports for this index.

CNX Pharma: The Pharma Index made new life time highs this week, and with the negative price action in other indices this suggests a rotation back into the defensive pharma space which is evident from the RS line. The RS line failed to cross its 40 week MA which still not warrants a outperform as per our signal description.

CNX IT: The index overcame resistance around 10,000-10,200. Price action wise, if the index breaks out to new highs along with a positive crossover of its 10 and 40 week moving average then the trend will change to positive. Long term outperformance though is doubtful as the RS line vs the Nifty is still below its 40 week MA.

CNX FMCG: The FMCG Index took out its short term resistance of 18200 and has a lot of overhead resistance at 19,000. Though the index signalled is a buy with a positive crossover of the 10 and 40 week MA, long term outperformance seems muted as the RS line is below its 40 week MA while the index has room to run up as momentum readings on the 14 week RSI are pointing up but far from overbought.

CNX Metal, Infra, Energy & Realty: The 4 indices may see further correction/ consolidation in the coming weeks as momentum readings on the 14 week RSI cooled off from the overbought zone. However, long term outperformance of the Energy space looks doubtful as its RS line isbelow its 40 week MA.

Update for the week ending – 13th July 2014.

Nifty Weekly Technical Analysis:

The Nifty lost close to 4% during the week. Price-action wise the index formed an outside day pattern on the weekly charts as the highs and lows of the week surpassed previous week’s highs and lows and the index also closed below previous week’s close and low. In terms of momentum readings, the index looks extended on multiple timeframes as the RSI reading on the 14, 21 and 36 week timeframes have just reverted below the overbought zone. Previously when this has occurred we have seen consolidations or corrections and going by the price-action this looks likely to happen this time also. FII index futures data shows that they have cut long positions and increased their shorts during the week and have also increased short positions in call options and longs in put options which are indicative of a further down move. Important supports lie at 7100-7200. Closing below that zone will open the range till 6800.  

CNX MIDCAP Index: We had highlighted last week that a short to medium term a retracement close to the 10 week MA around 9800-9900 cannot be ruled out this also coincides with the previous lifetime highs. Near-term support zone lies at 10,000. Momentum reading on the 14 week RSI suggests that a consolidating/ corrective move is likely.

CNX Small Cap Index: The index is near short term supports at 4900-5000 and the 2010 highs of around 4600 levels should act as medium term supports. The RS line is pointing down suggesting relative underperformance vis-à-vis the Nifty while momentum as per the 14, 21 and 36 week RSI has cooled off from the overbought zone. Previously when the RSI has moved below the overbought line, the index has seen consolidation/ correction and price action is supportive of this.

CNX Auto: The index has formed an outside day pattern too similar to the Nifty – consolidation. /corrective move is likely in the short term. Momentum as per the 14, 21 and 36 week RSI has cooled off from the overbought zone. Previously when the RSI has moved below the overbought line, the index has seen consolidation/ correction and price action is supportive of this. First test would be the 6500 zone, below which supports lie at 6000 levels.

CNX Bank Nifty: The index broke its short term supports as it could not hold the post election result lows. As highlighted the previous week- underperformance against the Nifty is likely as the RS line is pointing down and tests its 40 week MA. The momentum readings along with price action suggest a further down move in the coming weeks with supports at 14,000 and 13,000.

CNX Pharma: The Pharma Index made new life time highs this week, and with the negative price action in other indices this suggests a rotation back into the defensive pharma space which is evident from the RS line. Momentum reading though overbought doesn’t mean a sell as the index can remain overbought for an extended period of time. Current price action is suggesting that Pharma could rally further over the coming weeks to months.

CNX IT: As mentioned earlier the index saw resistance around 10,000-10,200 which looks very difficult to clear. Price action wise, if the index breaks out to new highs along with a positive crossover of its 10 and 40 week moving average then the trend will change to positive. Long term outperformance though is doubtful as the RS line vs the Nifty is still below its 40 week MA though pointing up.

CNX FMCG: The FMCG Index is consolidating at the moment with a lot of overhead resistance near 19,000. Though the index signalled a buy with a positive crossover of the 10 and 40 week MA, long term outperformance seems muted as the RS line is below its 40 week MA while the index has room to run up as momentum readings on the 14 week RSI have cooled down and sustaining above 50.

CNX Metal, Infra, Energy & Realty: The 4 indices may see further correction/ consolidation in the coming weeks as momentum readings on the 14 and 21 week RSI cooled off the past 2 weeks from the overbought zone. However, long term outperformance of the Energy space looks doubtful as its RS line has closed below its 40 week MA.

Next update

Hi, we will provide the next update on 13th July as we are in the process of updating some additional data and charts. Sorry.