Sector Technicals for the week ending – 1st March 2015.

Nifty Weekly Technical Analysis:

The Nifty index closed at 8900 in the budget session and now faces massive overhead resistance in the 8900-9000 zones, though the MACD is in the buy mode and we are seeing a higher histogram number, which is supportive. The Small cap index has broken 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 and have reduced short positions in Index futures. Hence, the longer term outlook still remains positive as the index is within its price channel. As the index is back near life time highs and resistance, fresh allocation should be made if we get 1 or 2 days of successful closings above 9000. That would signify a more positive bias and momentum shift.  

Sector Technicals:

CNX Midcap and Smallcap: The small cap’s managed to breakout after a 10 month trading range, if it manages to stay above the previous resistance zone, we could see a bigger rally in small cap stocks. Also, the RS line of small cap’s is poised to close above its 40 week MA which is supportive. The mid cap index is facing some resistance in the 13300 zone and the MACD is not indicating much. If the small cap’s follow through with the break out then Mid cap’s also have a high probability of breaking out to new highs.   

CNX Auto: The Auto index seems to be losing leadership as it’s unable to move above its trend line and the 9000 zone is proving to be a resitance. 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 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 FMCG index took a beating last week, mostly due to the higher weightage to the ITC stock. In relative terms, the RS line is back below its 40 week MA and seems to be back at supports. If the index manages to close above prior resistance of 21300 levels then that would be a positive.

CNX IT: As mentioned before, the IT space looks positive post its breakout at 11800-900 zones. With a strengthening MACD and RSI the medium term still looks positive for this space. The RS line is indicating that IT will continue its outperformance 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 still looks positive 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.