Sector Technicals for the week ending – 12th December 2014.

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 further information please read the signal description and the detailed sector technical analysis further below. For more information on relative strength please click on the Relative Strength section above.

Nifty Weekly Technical Analysis:

Last week’s call went wrong as I expected a range bound week but the opposite happened!. Going forward – The Nifty is at a critical juncture. The 8150-8200 zone is a key support for the short to medium term. The 14 week RSI has weakened and the MACD is also in sell mode. The VIX inched up to about 14%. In the derivatives space FII’s closed long positions in index futures and call options and increased longs in index put options. To sum it up – FII’s have closed longs and taken a bearish stance via put options and technical indicators are pointing to a downside. However, it would be prudent to doubt the medium term uptrend if and only if it gives a weekly close below 8150. Till then, this dip provides an opportunity to play a short term bounce with a favourable risk-reward ratio with a stop around 8150.

Sector Technicals:

CNX Auto: The Auto index is trading within its price channel. But on a relative basis, the RS line is still signalling strength in the auto space relative to the Nifty. The MACD has flat-lined & momentum is waning – A break below the lower channel would be the first sign of worry.

 

Bank Nifty: The banking index closed in the red but on a relative basis the RS line is signalling strength in the banking space relative to the Nifty. Short term supports are at 18000 while long term supports are place above 16000.  

CNX Pharma: The index is still above the important 11000 zone and the RS line saw an uptick suggesting a flight to defensives. 11000 and 10000 are the important supports.   

CNX FMCG: As mentioned before, the view was positive with a breakout at the 20,000 level. For the second consecutive week the RS line has closed above its 40 week MA with an uptick. Considering these moves in Pharma and FMCG together – this could be a rotation to defensives.

CNX IT: The IT index is still an underperformer vs. the Nifty as its RS line is below its 40 week MA. Price action wise, the index was one of the biggest losers last week. As mentioned last week, its better to avoid any longs in the IT space and a close below the second support one of about 10300 would be bearish.

CNX Infra, Metal, Energy & Realty: All the 4 indices look weak in the short to medium term and on a longer term basis all are trading below their 40 week moving averages. As mentioned previously - it would be prudent to add to positions once these indices close above the 40 week MA of have a positive crossover of a 10 and 40 week MA. Till then, they should be avoided.    

      

CNX Small Cap and Mid cap: The Mid cap index is still outperforming relative to the Nifty but the RS line for the small caps has closed below its 40 week MA. Any break below the 4600 level on the small cap index would be bearish.