Sector Technicals for the week ending – 5th 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:

The Nifty looks likely to consolidate around these levels till year end with immediate support around 8500. The 8500 strike put has the highest open interest followed by the 8400 strike while on the call side the highest open interest is in the 8600 strike followed by 8700 suggesting a tight range till the end of the December series. Also, the VIX has closed a tad below 12% which is indicative of this view. In the derivatives space FII’s covered long positions in index futures over the week post the RBI monetary policy meet. So we have a low VIX, closure of longs by FII’s and a tight range as per open interest accumulation – all signs pointing to a tight range, at least for the coming week.

Sector Technicals:

CNX Auto: The Auto index is trading within its price channel. But on a relative basis, the RS line of the auto index made a new high and 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 index closed at lifetime highs and on a relative basis the RS line also made a new high - signalling strength in the banking space relative to the Nifty. Momentum wise the index is in overbought and can stay overbought just like the Auto index did during the start of this year.

CNX Pharma: The index tested its resistance at the re-test zone of its uptrend line. Remaining above the 11000 zone is key to the sustained uptrend in Pharma stocks. 11000 and 10000 are the important supports.   

CNX FMCG: As mentioned before, the view was positive with a breakout at the 20,000 level, but this week the RS line managed to close above a downward sloping 40 week moving average. Will this outperformance last just like it did in the previous years ?.  

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 closed below supports in the 11,600/ 700 zones. A weekly close above this support zone would be bullish, but till then it’s better not to add to longs in the IT space.

CNX Infra, Metal, Energy & Realty: All the 4 indices look weak in the short to medium term and on a longer term basis – all except Infra are trading below their 40 week moving averages – 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 closes the at all-time highs and looks setup for more upside. Small caps are still positive as they are trading above an important support zone of 4500-4600 and a weekly closing above 5500 could lead to a sharp rally.