Sector Technicals for the week ending – 7th June 2015.

Nifty Weekly Technical Analysis:

The Nifty lost close to 4% last week. That too after a rate cut – going down on good news – Mr. Market is telling us something here. Last week’s bullish data points have completely changed to bearish mode. We have closed beneath an important support zone of 8180. The last few times this zone held well (blue arrows). BUT this time it’s a big red candle with no lower shadows, looks like price action is signalling that the downtrend has some more legs to go. There can be some back and forth around this area but looks like 8500-8600 has established itself as the medium to long term resistance. Nifty has closed below 40 week MA, the MACD line is close to 0 and in the past, returns below 0 reading have been volatile and mostly negative. The RSI is below 50 and combined with MACD it is not a pretty picture. FII derivatives data for 5^th is not available but going by the data for 4^th they have reduced net longs by a significant amount. Looks like it’s better to wait on the side-lines or switch to bonds.

Weekly charts :

Sector Technicals:

CNX Midcap and Smallcap: Both the indices reverted from their resistance zones. Technically both might see some more selling pressure/ moderate returns due to the combination of a sell trigger on the MACD and RSI below 50. Small caps look more vulnerable at this point for a sell off as they are below their 40 week MA. Would be prudent to increase longs only above the resistance bands and if we get a but trigger from the MACD.

CNX Auto: The setup for the Auto space looks negative too. MACD = sell, RSI <50, Auto index < its 40 week moving average – these 3 are not pointing out to a positive outlook for the coming few weeks. The index closed right at supports. Better to take longs only if we can sustain a few weeks above this support and see some improvement on the MACD and RSI indicators.

 

Bank Nifty: Banks were the biggest loser last week, technically the picture is negative – same as the Auto index as per the indicators. Price action wise we are just at supports, so yes there can be a bounce back for a day or 2 but on a weekly timeframe things look negative.  

CNX Pharma: As mentioned before, the 13000 level holds the key for a sustained uptrend, better to reduce longs or wait to increase long exposure for some time till we get 2 weeks of continuous closing above the 13000 mark. RSI is below 50 after a long time and once we lose support things would get ugly.

CNX FMCG: Still not a pretty picture for the FMCG index as it is below the 40 week MA. The index lost support of 20000. Better to wait and watch. Looks likely that this space is going to be range-bound for the near term. Longer term the picture looks negative as the MACD line is negative and also in sell mode along with a RSI <50. This combination is a serious negative.

CNX IT: As mentioned before, better to wait and watch the IT space as it was right between supports and resistance and also its 40 week MA. Now, we are below all those levels with a negative MACD and RSI below 50.

CNX Infra, Metal, Energy & Realty: As mentioned last week, out of the 4 indices Infra looks the best from the long side but still better to wait or use less exposure. There could be a tradable bounce in the Energy space but for longer term better to wait for a move above the 40 week MA and a positive crossover of the 10 and 40 week MA’s. Expect Metals and Realty to underperform.  

 

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.