Sector Technicals for the week ending – 29th March 2015

Nifty Weekly Technical Analysis:

The Nifty lost close to 3% last week and took out its 1^st major support zone and also closed the week below its trendline support, which held for almost a year. The MACD indicator is in sell mode, while the 14 week RSI has closed below 50 after spending a year above that level. On the flows front, we saw massive long unwinding by FII’s in index futures and have increased some longs in call options. Though my rules say to be long till we are above the 40 week moving average, price action wise it looks like we are in for some tough times ahead as we closed below supports and trendline support. Also, the Index is just above its 40 week MA and second major support zone of around 8150-8180 while the RSI just entered the sub 50 range after a long time. It would be interesting to see if the 8150 zone holds, other than that a prudent stop loss would be a close below the 40 week MA.   

Sector Technicals:

CNX Midcap and Smallcap: The small cap index is back below supports and looks likely to fall back into a broad trading range. The 40 week MA seems to be rolling over, which indicates a bit of range bound/ flattish returns ahead. The mid cap index too just closed above its important support zone, if this does not hold then the next important zone is around the 12000 mark.    

CNX Auto: As mentioned before, 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 stiff resistance. Also, a sell on the MACD along with a weakening MACD line and 14 week RSI doesn’t bode well for the medium term. The 8000-8100 zone looks like the next support zone for the index and it could be tested in the coming few weeks.

 

Bank Nifty: The banking index broke supports of 18200 and similar to the Nifty, the MACD is weakening and in sell mode while the RSI is also weak. The next important support zone could be near the 40 week MA and the September highs around the 16200 mark.

CNX Pharma: As mentioned before, the Pharma index looks to be the only bright spot amongst other indices. The MACD is in buy mode and RSI is overbought but the index could stay overbought for long periods as it did before. Price action wise it seems that the index is seeing some selling pressure at higher levels, as we have not been able to close and sustain above 13000 on the index.

CNX FMCG: The FMCG index is an avoid as it failed to hold its 40 week moving average, while on a relative basis the RS line looks likely to break is support. Better to wait and watch before taking any fresh longs here.   

CNX IT: The IT index closed at a important point, just above the crucial support of 11900. As long as the index trades above 11900 the medium term trend looks positive, but a close below that doesn’t bode well for IT stocks.

CNX Infra, Metal, Energy & Realty: The Infra, Energy, Metals and Realty space have massive overhead resistance and should be avoided. Their RS lines vs the Nifty are in all time low territory and look likely to stay low for the medium term.

    

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.