Sector Technicals for the week ending – 15th February 2015

Nifty Weekly Technical Analysis:

The Nifty index managed to trade above the 8500-8600 support zone. However, the index has massive overhead resistance in the 8900-9000 zone, though the MACD is in the buy mode but there is no major difference on the histogram, which remains a concern. The major development to watch would be if the Mid and Small cap indices break out to new highs – that could support a breakout on the Nifty too. On the flows front, FII’s are still net long in index futures BUT have increased short positions in the Index. Hence, the longer term outlook still remains positive as the index is within its price channel. We could see some choppy sessions in the near term as the index is close to channel resistance and FII’s have increased short positions marginally. The important event to lookout for would be if the Mid and Small cap indices can breakout.

  

Sector Technicals:

CNX Midcap and Smallcap: Both the indices are in major resistance territory. The MACD histogram for both the indices is flat, it would be better to wait and increase allocation once we get a breakout with a positive histogram number. In relative terms, Mid cap’s seem stronger between the two as it’s RS line is above its 40 week MA with a upward slope.  

CNX Auto: The Auto index seems to be losing leadership as it’s unable to move above its trend line. Also, a sell on the MACD along with a weakening MACD line and 14 week RSI doesn’t bode well for the medium term. In relative terms, the RS line vs. the Nifty is back at the September-October levels signalling a loss of strength vs. the Nifty.

 

Bank Nifty: The banking index still looks positive. However, the RS line shows that the Banking index is losing leadership vs. the Nifty. As long as the RS line trades above the 2013 highs banks should be the outperformers.  

CNX Pharma: The Pharma index was one of the biggest gainers with a 4% uptick for the week. Price action wise the index is holding key support of 11000 and the MACD is also strengthening. In relative terms the RS line seems to be testing the previous highs. A breakout on the RS line would suggest a rotation into defensives and can put the Pharma space back in the leadership position.

CNX FMCG: The view is still positive with a breakout at the 20,000 level and we saw new all-time closing highs for this index the past week. A strengthening MACD and RSI also are indicating more upsides to come. In relative terms, the RS line seems to be bottoming out, signalling that the FMCG space could outperform the Nifty in the coming weeks.

CNX IT: The IT space also broke out to new all-time highs and with a strengthening MACD and RSI the medium term still looks positive for this space. The RS line is indicating that IT could be a outperformer vs. the Nifty.

CNX Infra, Metal, Energy & Realty: The Infra, Energy and Metals space have massive overhead resistance and their RS lines are in all time low territory. However, the Realty space looks interesting as its above crucial supports and its RS line seems to be putting in a relative bottom vs. the Nifty.

       

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 more information on relative strength please click on the Relative Strength section above.