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 Momentum Model - Weekly update

Updating our momentum model for the week ending 31st May 2015.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Sector Technicals for the week ending – 31st May 2015.

Nifty Weekly Technical Analysis:

The benchmark Nifty index held up well last week thanks to a Friday surge. The index is still above the 40 week MA with a positive crossover of 10 and 40 week MA’s – so intermediate term trend remains positive. The next logical resistance zone now seems to be in the 8550-8600 area as that’s where the resistance and the upward sloping trend-lines meet. The 14 period RSI is holding above 50 and the MACD histogram has improved, both positive signs. The VIX also cooled off to 16.65% and FII’s are still net buyers in index futures (another positive).

Weekly charts :

Sector Momentum Model - Weekly update

Updating our momentum model for the week ending 24th May 2015.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Sector Technicals for the week ending – 24th May 2015.

Nifty Weekly Technical Analysis:

The benchmark Nifty index gained more than 2% last week. The index is now back above the 40 week MA and the support zone around 8180 levels held quite well on a weekly closing basis. This zone was defended successfully over the last 3-4 weeks – maybe this is now a short to intermediate term bottom. The next logical resistance zone now seems to be in the 8600 zone as that’s where
the resistance and the upward sloping trendlines meet. The 14 period RSI has closed above 50 which is a good sign. The VIX, which was pretty sticky around 20% levels has cooled off to just below 17% while FII’s have turned net buyers in the index futures as well as call options space – Both suggesting a positive outlook.

Weekly charts :

Sector Momentum Model

The above strategy is a sector momentum model which buys the strongest sectors as measured by their weekly returns over a certain look back period and also that are only above the 40 week moving average. So in this way we are trying to identify sectors that are showing momentum and are also in uptrends as defined by the moving average.

Top 1 means we are invested in only 1 sector index which is given a rank of 1 and Top 2 means we are invested in the top 2 ranked sectors. Example, as of 15 May 2015 Pharma and Auto indices were ranked 1 and 2 so the Top 1 portfolio will buy into Pharma only while the top 2 portfolio will buy into Pharma and Auto indices.

The indices considered for this model are :

CNX Auto

CNX Bank

CNX Energy

CNX FMCG

CNX Infrastructure

CNX IT

CNX Media

CNX Metal

CNX Pharma

CNX Realty

The price only returns of both portfolios have managed to beat the Nifty index on a price and total returns basis and also have a much lesser drawdown than the Nifty. Yes there will be periods where the portfolios would lag Nifty returns on a shorter timeframe but on a long term basis I believe they would perform well given the trend following filter that we have applied, and one cannot rule out the benefits of a mechanical strategy over the long term. 

Thanks for reading :) 

Sector Technicals for the week ending – 10th May 2015.

Nifty Weekly Technical Analysis:

The Nifty closed the week right near its long term supports of 8180-8200 zones. However the index is below its 40 week moving average and as per my rules I am in exit mode. Price action wise, I would say the longer term trend would turn negative if we close the week below the support of 8180. On the technical front the MACD histogram registered its highest negative reading in 3 years while the RSI is also below 50 after more than a year. Also, the India VIX at 19% suggests a bit of volatility ahead. The factors mentioned suggest that the coming weeks would resolve to the downside but let the price action confirm if the week closes below 8180. As per the rules, I am out as the index is below its 40 week moving average.  On the flows front, FII’s have reduced net longs drastically and have increased positions in put options.

Sector Technicals for the week ending – 24th April 2015.

Nifty Weekly Technical Analysis:

The Nifty closed below its first crucial support zone of 8550-8600 and for the medium term the trend seems to be negative as long as we trade below this zone. On a longer term basis, the 8150-8200 zone remains a major support. If that breaks then the longer term uptrend would become suspect and we also closed just 11 points below the 40 week moving average – so there seems to be a lot confluence of price support plus moving average support in the 8150-8200 zone, that is why I think these are important levels for the longer term trend. On the flows front, the India VIX closed around the 19% zone which is very alarming. Also, FII’s have reduced net longs in the index futures space and are well hedged via long positions in index put options.  

Sector Technicals:

CNX Midcap and Smallcap: The small and mid-cap indices respective RS lines performed well relative to the Nifty suggesting continued outperformance. However, both the indices closed below their 1^st support zones just like the Nifty and are now at their 2^nd support areas. A break below these supports and a close below 40 week moving average would be trouble for the longer term.

CNX Auto: As mentioned before, the Auto index’s 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. 8000 is going to be an important medium/long term support for the Auto index.

 

Bank Nifty: The banking index showed some strength for a day or two but its chart is also very similar to the Nifty in terms of closing near supports and 40 week moving average. The next 2-3 weeks are going to decide the longer term trend for banking stocks. RSI has closed below 50 after a very long time..watchout.

CNX Pharma: The Pharma index took a beating last week and as mentioned before, the 13000 level holds the key for a sustained uptrend, better to reduce long exposure for some time till we get 2 weeks of continuous closing above the 13000 mark.

CNX FMCG: The RS line for the FMCG index is holding supports while the index is just at its resistance. Still it would be better to wait and watch before adding to longs. 

CNX IT: The IT index took out its second support zone last week and closed below its 40 week moving average. I would be a buyer only above the 40 week moving average..but hey that’s just me !

CNX Infra, Metal, Energy & Realty: Energy and Realty still have quite some overhead resistance, Infra looks best of the lot while the Metals space just closed 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 only Infra is trading above its 40 week MA’s but has moved back below resistance – nothing seems to be going well for these 4 indices.

 

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.