Sector Technicals for the week ending – 12th April 2015

Nifty Weekly Technical Analysis:

The Nifty gained more than 2% for the week and moved comfortably past its resistance zones. The key point to note is that most of the indices saw strong price action for the week, especially the Mid and Small cap indices broke out to new all-time highs – Could that be a sign of a new all time high on the Nifty too?. On the derivatives side, FII’s have increased net longs in index futures and have added significantly to net longs in index call options. I mentioned last week to be long since my rule is to stay long above the 40 week moving average and that played out well. Looks like the index is heading to its next resistance zone near 9000. A lot of sectoral indices have shown strong gains during this week – This price action across the board and Nifty moving past its resistance zones with ease suggests a positive outlook over the next few weeks.

Sector Technicals:

CNX Midcap and Smallcap: The small and mid-cap indices broke out to new highs while their respective RS lines too performed well relative to the Nifty. I believe as long as both these indices trade above supports and perform well, it’s an overall positive for the Nifty too!. Both the Indices are in uncharted territory and there’s no way to tell where they will pause.  Momentum wise, both have 14 week RSI readings of below 70, so there is a possibility of seeing more momentum in these indices.

CNX Auto: The Auto space held up well, but its first hurdle is going to be clearing the 9000 levels. Relative to the Nifty, it looks difficult to outperform as the RS line is not making new highs and seems to be reverting to its 40 week moving average.

 

Bank Nifty: The banking index moved back above its support zone of 18200. However, the RS line has not performed well over the past few weeks signalling some underperformance of the banking space. As long as the RS line trades above its 40 week MA, banking could be an outperformer relative to the Nifty.

CNX Pharma: As mentioned before, 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. Price action wise, the index has closed well above 13000. Holding 13000 would be key to a sustained uptrend.

CNX FMCG: The FMCG index came back with a vengeance!. The RS line is holding supports while the index is just at its resistance. Still it would be better to wait and watch as other sectors are offering better outperformance opportunities.  

CNX IT: The IT index held its important support zone near 11900. The RS line too is showing signs of outperformance as its holding above its 40 week MA. The trend is positive for the IT space as long as it holds above 11900.

CNX Infra, Metal, Energy & Realty: All the 4 indices saw good price action after a long period of time. While Energy and Realty still have quite some overhead resistance, Infra looks best of the lot while the Metals space just close above an important resistance and seems to be breaking out of a downtrend. However, it’s best to be long only once they are above their 40 week moving average. Currently Infra and Realty are trading above their 40 week MA’s.

    

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.