Sector Technicals for the week ending – 22nd March 2015.

Nifty Weekly Technical Analysis:

Back from the holidays and things aren’t looking good on the Nifty. The index closed a tad below its support zone of 8600 and the MACD and RSI indicators are showing massive negative divergences, while the MACD is already in the sell mode. However, the VIX is still just at 14% levels, suggesting no build-up of fear as per the options market. The VIX could be signalling a bounce back in the coming week. On the flows front, we saw some long unwinding but FII’s are still net long in index futures and have increased some longs in puts suggesting some hedging activities. Still sticking to a positive longer term outlook as the index is within its price channel. As the index is near the support zone of 8500-8600, it would be prudent to increase longs in a staggered manner. My stoploss is a close below the 40 week moving average.   

Sector Technicals:

CNX Midcap and Smallcap: It’s going to be a crucial week for the small cap’s as we closed just at supports. If the index closes below the 5550-5500 zone then small caps could fall back into the range-bound zone. The mid cap index is facing some resistance in the 13300 zone with medium term supports at 12650 and the MACD is in sell mode.   

CNX Auto: As mentioned before, the Auto index seems to be losing leadership as it’s unable to move above its trend line and the 9000 zone is proving to be a stiff resistance. 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. The 8100-8200 zone looks like the next support zone for the index.

 

Bank Nifty: The banking index is fast approaching supports near 18200 and similar to the Nifty, the MACD is weakening and in sell mode while the RSI is also weak. Suggesting mediocre returns for the short term. However, a break below 18200 is serious trouble for the banking index.  

CNX Pharma: The Pharma index looks to be the only bright spot amongst other indices. The MACD is in buy mode and RSI is overbought but the index could stay overbought for long periods as it did before. Won’t be surprised if we see a monster rally in Pharma stocks in the coming few weeks.

CNX FMCG: The FMCG index took a beating last week and closed just at support of 20000 and a tad above its 40 week moving average. It would be interesting to see if the index can maintain its uptrend above the 40 week moving average, while on a relative basis the RS line looks likely to break support. Better to wait and watch before taking any fresh longs here.   

CNX IT: After Pharma, the IT index looks best positioned for the medium term. Both on a price as well as on a relative basis. The index is trading above supports with a positive MACD as well as a healthy RSI above 50.

CNX Infra, Metal, Energy & Realty: The Infra, Energy and Metals space have massive overhead resistance and should be avoided. Their RS lines vs the Nifty are in all time low territory and look likely to stay low for the medium term.

    

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.