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.  

Sector Technicals for the week ending – 18th January 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 before, the Nifty is trading within the price channel shown below and a break below or above this channel will point to a trend/momentum shift. Technically, the MACD and the 14 week RSI indicators are pointing to waning price momentum in the Nifty. However, it would be prudent to call for a trend change only once the price channel is broken to the downside along with a weekly close below 8150. The VIX closed at above 17% level which is a bit alarming since one would expect a fall in VIX during an up move – is the options market pricing in something different?. 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 back with a massive long build-up in index futures. Hence, the outlook still remains positive as the index is above is lower price channel, VIX is below 20% and FII’s are on the long side in the futures market.

Sector Technicals for the week ending – 11th January 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:

Even a 3% loss during the week failed to break the lower price channel as shown below and mentioned in previous weeks. Also, the 8150-8200 zones acted as a major support on a weekly closing basis, yet again. Technically, the MACD and the 14 week RSI indicators are pointing to waning price momentum in the Nifty. However, it would be prudent to call for a trend change only once the price channel is broken to the downside along with a weekly close below 8150. The VIX closed at above 15% level which is not alarming. In the past a weekly closing above 20% has led to some turbulence in the Nifty. Hence, a weekly close above 20% on the VIX along with a close below its lower channel would be the first warning for a trend change on the Nifty. On the flows front, despite a huge closure of longs, we did not see any build-up of shorts from FII’s – which is a positive.

  

Sector Technicals:

CNX Auto: The Auto is trading below its lower price channel which was the first sign of caution for the Auto Bulls. 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. The MACD is in sell mode and the index is trading below is lower price channel - one can look out to book profits/ reduce exposure to Auto stocks at this juncture. 8000 looks to be a good medium term support and a move back above the lower price channel would be a medium-long term positive.

 

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 at these levels. Important supports are at 18000 while long term supports are placed above 16000. 

CNX Pharma: As mentioned last week, the index is trading below its uptrend line and resistance of 11000. 11000 seems to be a key resistance zone and it would be prudent to lighten up on Pharma longs. With the MACD in sell mode looks likely that the Pharma index is going to trade in a range of 10000-11000. A break below 10000 would signal a trend change to the downside for the medium term.     

CNX FMCG: The view is still positive with a breakout at the 20,000 level. However, the FMCG space might be a relative outperformer 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: Price action wise, 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: All the 4 indices look range-bound to negative in the short to medium term. On a longer term basis all are trading below their 40 week moving average. As mentioned previously - it would be prudent to add to positions once these indices close above the 40 week MA or 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 is still outperforming relative to the Nifty but the RS line for the small caps has closed above its 40 week MA and the Small cap index looks setup for a break-out to the upside after a long period of consolidation. Any break above the 5500 level on the small cap index would be bullish.  

Sector Technicals for the week ending – 4th January 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 before, the 8150-8200 zone is a key support for the short to medium term and the index managed to close well above 8300 and seems to be trading in the price channel as shown below. The 14 week RSI is well below overbought. However, the MACD is in sell mode. The VIX is still at about 14%. In the derivatives space FII’s increased long positions in index futures and in index put options suggesting some hedging of long positions. To sum it up – Indicators are showing weakness/ pause but price performance wise the Nifty looks positive as long as it trades above the lower channel, also in terms of flows the FII positions are still on the long side suggesting a positive bias.

Sector Technicals:

CNX Auto: The Auto index broke below its lower price channel which should be the first sign of caution for the Auto Bulls. 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. The MACD is in sell mode and the index is trading below is lower price channel. One can look out to book profits/ reduce exposure to Auto stocks at this juncture. A move back above the lower price channel would be a medium-long term positive.

 

Bank Nifty: The banking index closed at an all-time high and also on a relative basis the RS line is signalling strength in the banking space relative to the Nifty. Important supports are at 18000 while long term supports are place above 16000.  

CNX Pharma: The index is trading below its uptrend line and resistance of 11000. With the MACD in sell mode looks likely that the Pharma index is going to trade in a range of 10000-11000.  

  

CNX FMCG: The view is positive with a breakout at the 20,000 level. However, the FMCG space might be a relative underperformer as its RS line is back below its 40 week MA.

  

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 looks likely to trade in a range of 10300 to 11500. A weekly close above the 11500 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: Except Infra all the 3 indices look range-bound in the short to medium term. On a longer term basis Infra is trading above its 40 week moving average. As mentioned previously - it would be prudent to add to positions once these indices close above the 40 week MA or 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 is still outperforming relative to the Nifty but the RS line for the small caps has closed above its 40 week MA and the Small cap index looks setup for a break-out to the upside after a long period of consolidation. Any break below above the 5500 level on the small cap index would be bullish.