Update for the week ending – 7th September 2014

Update for the week ending – 7^th September 2014.

The below table is just a scan that I run to check the overall trend of an index and its performance vs. the benchmark Nifty. For further information please read the signal description and the detailed sector technical analysis further below. For more information on relative strength please click on the Relative Strength section above.

Nifty Weekly Technical Analysis:

The uptrend in Nifty is intact as it continues to make higher highs, the previous resistance of 7850 should now act as a support zone going forward. Momentum reading as per the 14 week RSI has entered the overbought zone. However the index can charge higher and still remain overbought as we saw post the election result. So far, price action suggests the index can move higher with supports at 7850-7900. A violation of these supports might jeopardize the short term uptrend. In the derivatives space, FII’s continue to be net long in index futures by more than 150,000 contracts and are also net long in call options suggesting a bullish bias. 

Sector Technicals:

CNX Auto: The Auto index saw fresh breakout to new highs and also a new high on the RS line suggesting that the uptrend and outperformance vis-à-vis the Nifty index is intact. Price action wise looks like the auto index is likely to trade the price channel as shown below, with major support in the 7200-7300 zones.

 

Bank Nifty: The Banking index also saw fresh breakout to new highs and managed to close above the previous highs suggesting a good support zone in the 15500-15600 area. Momentum wise, the RSI reading is below overbought and can go higher from here, as long as 15500-15600 holds on a weekly closing basis the uptrend should be intact.

CNX Pharma: The Pharma index also saw fresh breakout to new highs and managed to close above the previous highs. Momentum wise, the RSI reading is very overbought at 83.6 ! suggesting that we could see a short term correction/ consolidation period in the near future. A weekly close below 9500 would jeopardize the short/medium term uptrend.

CNX FMCG: The FMCG index is struggling at its previous high which is also the resistance zone as we pointed out in the earlier posts. The index is not likely to outperform the benchmark Nifty as the RS line is still in a downtrend with a downward sloping 40 week moving average.

CNX IT: The IT index is in a strong uptrend as its broken out to new highs and the uptrend should be intact as long as it trades above the 10400-10500 zone. Though the index has outperformed the benchmark over the last few weeks, on a longer term we would classify it as an outperformer if its RS line manages to trade above its 40 week moving average.

CNX Infra, Metal, Energy & Realty: These 4 indices are underperformers vs the benchmark of which Infra and Energy look positive on a short term basis as they are trading above supports and have broken above their short term downtrends. While Realty and Metals could face some pressure going forward.

CNX Small Cap and Mid cap: The Mid cap index has broken out to new highs and the outperformance is likely to continue due to a upward sloping RS line, any closing below 11400-11500 could make the breakout suspect. Small caps are still positive as they are trading above an important support zone of 4500-4600.