Update for the week ending – 3rd August 2014.

The below table are just scans that I run to check the overall trend of an index and its performance vs. the benchmark Nifty. For further information please read the detailed analysis below and for more information on relative strength please click on the Relative Strength section above.

Nifty Weekly Technical Analysis:

The index failed to close above 7800 for the week due to the sell-off on Friday. The MACD histogram continues to weaken and we may see a bit of volatile sessions going ahead however the RSI is taking support around 63-64 levels and we are trading above key support zones. A breakdown in RSI support and a sell signal by the MACD could spell trouble for the medium term. FII index futures data shows that they have increased long positions during the week – so we could see a bounce back to 7700 levels but trading would be volatile as we are still above important support zones of 7400. Looks likely that we are going to trade in a range between 7400/ 50 and 7800/ 50.

CNX Auto: As highlighted earlier, flattish RS line suggests that the Auto index might perform poorly vis-à-vis the Nifty. For the near term one should be cautious as MACD and RSI readings are weakening. However, the medium term uptrend would be in danger if the index breaks below the 6500 zone as that converges with the uptrend line as well as prior support.

CNX Bank Nifty: The index is facing considerable resistance near the 15,700 area and as highlighted the previous weeks- underperformance against the Nifty is likely to continue as the RS line is pointing down and tests its 40 week MA. A breakout both on the price as well as the RS line to new highs will confirm if the uptrend and outperformance of banking stocks is intact. The momentum reading on the 14 week RSI has fallen below its pre-election run up readings and the MACD has given a sell signal which is a major overhang, the 14000 and 13000 zones 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 crossed its 40 week MA which triggered an outperform as per our signal description. Price action wise, the index could give up some gains as it could not sustain the new highs. However, the short to medium term uptrend should be intact as long as it trades within its price channel.

CNX IT: The index needs to breakout of its resistance around 10,500 which will change the trend to positive. Long term outperformance though is doubtful as the RS line vs the Nifty is still below its 40 week MA. The 14 week RSI has reverted from the overbought zone suggesting that the index might not take out this resistance, though this could change during the week. It would be prudent to wait before entering the IT space and enter only on a breakout above 10,500.

 

CNX FMCG: The FMCG Index 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. It would be best to enter FMCG once it breaks its resistance zone.

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 are moving lower and the MACD has triggered a sell. However, long term outperformance of the Energy space looks doubtful as its RS line is below its 40 week MA. The Metals index was unable to take out previous resistance and looks likely to head to the 3000 zone. The Infra index closed at critical support, below which it can slide to 2800 levels. The Energy space looks very weak and could easily slide to the next support near 9000. The Realty index also closed at crucial supports, if 240 breaks on the downside then the realty index could easily slide to the 200 levels.

CNX MIDCAP Index: The long term remains positive as long as 9800-9900 holds. On a shorter timeframe, the index looks likely to trade in a range of 10500-11,500. The RS line below failed to cross above its previous highs which suggests muted performance vis-à-vis the Nifty. Momentum reading on the 14 week RSI has deteriorated considerably over the last few weeks while the MACD has also weakened during this time.

CNX Small Cap Index: The index held support around 5000 levels. The RS line is pointing down and failed to cross above its previous highs suggesting relative underperformance vis-à-vis the Nifty. Slowing momentum as per the 14 week RSI weakening MACD are key risks and suggest that the index might break its supports. Key supports are 4900/5000 and 4000.