Sector technical watch - weekly report on key sectors - 11 Jan :: HDFC Securities

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Current Observation:
 Daily Timeframe: The IT sector has witnessed a sharp upmove on Friday mainly due to a positive quarter result from
the sector major Infosys Ltd.
 After a couple of sessions of sideways consolidation with weak bias led to sharp upside rally on Friday and that move
has closed the previous opening downside gap of 8th Dec-14 (green horizontal line) around 10833 levels.
 Post downside breakout of the key intermediate trend line support around 10550- early Dec-14, the sector has
showed decline initially, but has recovered smartly later and is now showing upmove towards the prior broken area
of trend line. That trend line area is currently placed around 10970-11000 for the next few sessions.
 Daily momentum oscillator like 14 period RSI has turned up from near the 40 and is now heading towards the upper
60 levels (current reading 56). The daily RSI has been moving in a bearish high low range of 30/25-60 levels and
current upmove of RSI is expected to halt around the upper 60 levels.
 The presence of upside gap area around 10833 levels and the prior broken trend line area around 11000 levels and
the upper bearish range of RSI; all the three technical factors could weigh on bulls for coming weeks.
 Among the sector participants, Infosys, Persistent, Tech Mahindra, Mind Tree and CMC are some stocks which are
currently showing positive trend. Other stocks like, TCS, Wipro, HCL Tech, Naukri, Just Dial, KPIT and Mphasis are
largely in a weak trend.
 Weekly timeframe: The IT sector as per larger timeframe like weekly has showed smart upmove in last week and has
witnessed a smart recovery during this week.
 A ‘long legged doji’ type candlestick pattern has been formed during this week and the previous opening downside
gap of mid of Dec-14 around 10833 levels has been filled completely. The formation of long legged doji after a
decent upmove should be viewed seriously and this could be an alarming signal for bulls.
 The opening downside gap of mid of Dec-14 has been labeled as a bearish breakaway gap (normally breakaway gaps
are associated with the top reversal patterns) and unless the sector sustains above that gap area (above 11000
levels); the bulls are not out of danger.
 The current upmove of IT sector is close to encounter with the prior broken area of significant intermediate trend line
(blue up sloping trend line) around 11150 levels for next week.
 The positive sequence of higher tops and bottoms is some how intact and any formation of lower top from here could
possibly result in a beginning of weakness as per larger timeframe.
Summing Up:
 The detailed study of IT sector as per daily and weekly timeframe is indicating that the current upmove is going to be
short lived, as the chart patterns are suggesting that bulls are in danger way ahead.
 One may look for a positional shorting opportunity in IT sector on any upside move up to 11000-11150 levels. After
showing a false upside move, the IT sector is expected to witness fresh decline and reach the lower levels of around
10000 in the next 3-5 weeks.
 The large cap (except Infosys) and some of mid cap IT stocks are still in a weak trend and those stocks could be
used for a selling opportunity on the rise.

Current Observation:
 Daily timeframe: The banking sector has failed to participate significantly in line with the last few sessions’ upward
bounce of the broader market. The sector was not able to continue with the upside momentum of previous session.
This is indicating a weak upside bounce as compared to previous sharp sell off.
 The opening downside gap of around 19000-18400 levels (green dotted line) is intact and last session saw that gap
area acted as a stiff resistance for the sector and led to decline from the swing highs. This is indicating a formation of
negative candlestick pattern of ‘counter attack bears’ on Friday.
 The immediate support of ascending trend line (brown up sloping line) is intact and that is going to offer support for
the sector around 18400 levels for next week. The important question is whether the banking sector could hold on
the immediate support..?
 The daily momentum oscillator like 13 period MACD is showing weak signal by moving below its signal line.
 The sector participants, except Kotak Bank and HDFC Bank all the other stocks like SBIN, Axis Bank, ICICI Bank,
PNB, Yes Bank, BOB are all showing weak indications around the short term highs. Other mid cap stocks like ALBK,
KTK Bank, Vijaya Bank, Syndicate Bank and BOI are all showing negative signals at the swing high levels.
 Weekly Timeframe: The banking sector seems to have been struggling to sustain above the strong intermediate
support of up sloping trend line (brown line) around18200 levels.
 After a smart upmove of last week, the banking sector has declined sharply this week and is now forming a weekly
negative candlestick pattern of ‘dark cloud cover’. This is not a good sign for bulls to hold on the defense.
 Currently the Bank Nifty has placed above the multiple supports of immediate ascending intermediate trend line
(brown line) and the next support of up sloping blue trend line around 18250 and 18000 levels respectively. But, the
sustaining on the support could be crucial.
 We observe a formation of negative divergence pattern in weekly 14 period RSI, with the recent higher high
formations in banking sector (lower high formation in weekly RSI). This is indicating that the upside momentum is
losing its strength.
Summing Up:
 The study of smaller to larger timeframe of Banking sector (Bank Nifty) is indicating a weak bias and we are likely to
see beginning of fresh declines by next week. The immediate lower levels supports of around 18250-18000 are under
threat and that could be pierced eventually. The downside target for banking sector for the next 3-5 weeks could be
around 17500 levels.
 One may look to go for a positional shorting opportunity in large cap as well as mid cap banking stocks (including
PSU banking stocks) for a reasonable downside targets for near term.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010630