Sector Technicals for the week ending – 15th February 2015

Nifty Weekly Technical Analysis:

The Nifty index managed to trade above the 8500-8600 support zone. However, the index has massive overhead resistance in the 8900-9000 zone, though the MACD is in the buy mode but there is no major difference on the histogram, which remains a concern. The major development to watch would be if the Mid and Small cap indices break out to new highs – that could support a breakout on the Nifty too. On the flows front, FII’s are still net long in index futures BUT have increased short positions in the Index. Hence, the longer term outlook still remains positive as the index is within its price channel. We could see some choppy sessions in the near term as the index is close to channel resistance and FII’s have increased short positions marginally. The important event to lookout for would be if the Mid and Small cap indices can breakout.

  

Sector Technicals:

CNX Midcap and Smallcap: Both the indices are in major resistance territory. The MACD histogram for both the indices is flat, it would be better to wait and increase allocation once we get a breakout with a positive histogram number. In relative terms, Mid cap’s seem stronger between the two as it’s RS line is above its 40 week MA with a upward slope.  

CNX Auto: The Auto index seems to be losing leadership as it’s unable to move above its trend line. Also, a sell on the MACD along with a weakening MACD line and 14 week RSI doesn’t bode well for the medium term. In relative terms, the RS line vs. the Nifty is back at the September-October levels signalling a loss of strength vs. the Nifty.

 

Bank Nifty: The banking index still looks positive. However, the RS line shows that the Banking index is losing leadership vs. the Nifty. As long as the RS line trades above the 2013 highs banks should be the outperformers.  

CNX Pharma: The Pharma index was one of the biggest gainers with a 4% uptick for the week. Price action wise the index is holding key support of 11000 and the MACD is also strengthening. In relative terms the RS line seems to be testing the previous highs. A breakout on the RS line would suggest a rotation into defensives and can put the Pharma space back in the leadership position.

CNX FMCG: The view is still positive with a breakout at the 20,000 level and we saw new all-time closing highs for this index the past week. A strengthening MACD and RSI also are indicating more upsides to come. In relative terms, the RS line seems to be bottoming out, signalling that the FMCG space could outperform the Nifty in the coming weeks.

CNX IT: The IT space also broke out to new all-time highs and with a strengthening MACD and RSI the medium term still looks positive for this space. The RS line is indicating that IT could be a outperformer vs. the Nifty.

CNX Infra, Metal, Energy & Realty: The Infra, Energy and Metals space have massive overhead resistance and their RS lines are in all time low territory. However, the Realty space looks interesting as its above crucial supports and its RS line seems to be putting in a relative bottom vs. the Nifty.

       

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.

Sector Technicals for the week ending – 8th February 2015

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:

As mentioned previously, the Index was vulnerable to downsides as the VIX was above 20%. In the past a weekly closing above 20% on the VIX has led to some turbulence in the Nifty. On the flows front, FII’s are still net long in index futures and have not increased short positions in the Index. Hence, the longer term outlook still remains positive as the index is within its price channel. The VIX above 20% is still hinting at some downsides in the short term but one could use declines to add to longs at supports near the 8500-8600 range. Next support zone is around 8200.

Sector Technicals:

CNX Auto: The Auto index is still trading below its lower price channel which was the first sign of caution for the Auto Bulls. The lower price channel could act as a strong supply level going forward. The weakening MACD does not bode well and is signalling muted returns going forward. On a relative basis, the RS line is still signalling strength in the auto space relative to the Nifty as long as the RS line is above its 40 week MA.

 

Bank Nifty: The banking index could not hold support of 19000. One can look to increase long exposure in the banking space on a successful close above 19000.  

CNX Pharma: As mentioned previously, the index is trading below its uptrend line. 11000 was a key resistance zone, which the index took out with ease. The uptrend line could act as a supply zone similar to the Auto index. The MACD is strengthening which could indicate a shift into defensive's.

     

CNX FMCG: The view is still positive with a breakout at the 20,000 level. The FMCG space has signalled relative outperformance vs the Nifty as its RS line is back above its 40 week MA. It would be prudent to wait and see if the RS line can close above its 40 week MA for the next 2-3 weeks so that one can increase longs in this space.

CNX IT: As mentioned previously, a weekly close above the 11800 mark should be seen as a sign of strength and one can look to add to longs in the IT space.

CNX Infra, Metal, Energy & Realty: Infra and Realty indices are looking positive on a short term as both are above important support zones. Metals is testing an important support zone while Energy is at a resistance. It is important to note that none of these indices have a positive crossover of their 10 and 40 week moving averages. It would be better to wait and watch.

 

                       

CNX Small Cap and Mid cap: The Mid cap index is still outperforming relative to the Nifty but looks likely to test its next support zone around the 12000 level. For the small caps, any break above the 5500 level on the small cap index would be bullish.  

Realty vs. Infra

The Infra and Realty indices have been the worst performers since the year 2009. Now, if one were looking to buy more or to make fresh allocation to these beaten down sectors which one would you chose? Let us see if relative strength can answer this question.

Relative strength (RS) measures the relationship between two assets. An RS line is calculated by dividing the price of one asset or index by another. A rising RS line means that the numerator is outperforming the denominator i.e. the numerator will gain more than the denominator or it will fall less than the denominator.

Both the indices are above their 40 week moving averages which is signalling a positive outlook for the medium term as long as they trade above their 40 week MA. But which index/ sector can give us a better return from this point? Have a look at the 3^rd chart below. It is simply the ratio of the Realty index divided by the Infra index. The ratio has moved back above its prior supports and the ratio has closed above its 40 week moving average. These 2 signs show that the Realty index could be a better performer than the infra index going forward. There can be whipsaws in this process but this it can help us identify high probability trades which can help decide where to allocate money better.

Thanks for reading! J

CNX Realty/ CNX Infra :

Sector Technicals for the week ending – 1st February 2015

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 failed to cross the 9000 mark and as mentioned previously, the index is trading within the price channel shown below and closed right below the upper price channel. A break below or above this channel will point to a trend/momentum shift. Technically, the MACD is in the buy mode and the 14 week RSI is close to overbought, which can take the market further up as it did post the election results while still being overbought. The VIX closed above the 20% level which is alarming. In the past a weekly closing above 20% on the VIX has led to some turbulence in the Nifty. On the flows front, FII’s are still long in index futures and have closed some longs in index options. Hence, the longer term outlook still remains positive as the index is within its price channel. The VIX above 20% is hinting at some downsides but one could use declines to add to longs at supports near 8500 and 8200.

 Sector Technicals:

CNX Auto: The Auto index is still trading below its lower price channel which was the first sign of caution for the Auto Bulls. The lower price channel could act as a strong supply level going forward. On a relative basis, the RS line is still signalling strength in the auto space relative to the Nifty as long as the RS line is above its 40 week MA.

Bank Nifty: Despite the sell off the banking index held supports and also on a relative basis the RS line is signalling strength in the banking space relative to the Nifty. One can look to increase long exposure in the banking space near supports of 19000.  

CNX Pharma: As mentioned previously, the index is trading below its uptrend line. 11000 was a key resistance zone, which the index took out with ease. The uptrend line could act as a supply zone similar to the Auto index.   

CNX FMCG: The view is still positive with a breakout at the 20,000 level. However, the FMCG space might be relative underperformer vs the Nifty as its RS line is back below its 40 week MA. It would be prudent to wait and see if the RS line can close above its 40 week MA for the next 2-3 weeks so that one can increase longs in this space.

CNX IT: As mentioned previously, the IT index looks likely to trade in a range of 10300 to 11800. A weekly close above the 11800 mark should be seen as a sign of strength and one can look to add to longs in the IT space.

CNX Infra, Metal, Energy & Realty: Infra and Realty indices are looking positive on a short term as both are above important support zones. Metals is testing an important support zone while Energy is at a resistance. It is important to note that none of these indices have a positive crossover of their 10 and 40 week moving averages. It would be better to wait and watch. While Realty has a lot of overhead resistance, the Infra space looks the best out of this lot.     

 

                     

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. For the small caps, any break above the 5500 level on the small cap index would be bullish.