Update for the week ending – 8th 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 biggest danger at the moment looks to be the FII positions in the index futures market, they have gone from being almost 90,000 contracts net long to now 3,000 contracts net short and have simultaneously increased longs in put options !! – Not a good sign for the market. Though we are still above support zones of 7400-7100 but it is interesting to note that when the Nifty fell from 7800 to 7400 during the budget, FII’s were net long that time but this time they are net short. Moreover, Nifty as well as majority of the sector indices have given a sell signal on the MACD and show loss in momentum as per the RSI indicator. Will Nifty break 7400 on the downside in the coming weeks?...time will tell – But coming few weeks are going to be volatile – that’s for sure given the global backdrop – wonder what Germany’s DAX index is pointing to as it’s lost a little than 10% in few weeks while the dollar index is creeping up (flight to safety of the dollar?).

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. The short term trend looks to be in danger as the index closed below the uptrend line from 2014 lows.

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 supports 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 RS line is above its 40 week MA which is an outperform as per our signal description. Price action wise, the index gave up some gains as it could not sustain the new highs (as mentioned last week). 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 still 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 below 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 is weak as it closed below 240. 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 drift down to its support zone  at 10,400-10,500. 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 given a sell signal.

CNX Small Cap Index: The index broke support around 5000 levels. The RS line is pointing down and is suggesting relative underperformance vis-à-vis the Nifty in the short term. Slowing momentum as per the 14 week RSI weakening a sell signal on the MACD are key risks and suggest that the index could break lower. Next key supports are at around 4000 at the moment.