With the market having drawn down considerably in the last couple of months and now showing some signs of halting that process, it is time to check out the sector influences and confluence of trends across different time frames. Accordingly, we have done a small exercise here using the RSI in daily and weekly time frames.
First signal that stands out is the formation of Range Shift pattern across a large number of indices. The pattern is present in Nifty, Nse100, Nse200, Nse500, Services, Realty, PSE, Pharma, Financial Services, Energy and Auto. Now, that is pretty wide list implying that the revival may be more meaningful this time.
Curiously, the signal is absent in the Bank Nifty and that may prove to be a bit of a dampener for a brisk advance on the Nifty. Banks are a big part of the Nifty and their being bullish certainly aids the effort of the Nifty to move higher quicker.
Now if we move to the weekly charts we can find the following evidence there:
Continued bullish: Financials, Services
Range shift: Consumption , Fmcg, MNC
Ranging : IT and Realty
Bearish: Media, Metals, Midcap, Psu Banks, Smallcap.
Since the bull trend names (Financials and Services) feature in the Range shift signals on the daily, it would appear that the trends in these two sectors are about to revive once again.
In the other sectors we can conclude that the bullish signals emerging in the daily charts may lead to some short term advances but not much beyond that. So the stocks have to be played accordingly.
Sector analysis and time frame correlations are an on-going process and one should check this every now and then to see where the action is shifting. This will certainly give us a small lead on the market and help us maximise our efforts towards stocks that are ready to perform better.
Two stocks with good charts in Financial Services are Icici Pru (strong bullish ranges) and Shriram Transport (range shift in both time frames).
From Services, IT major Infy remains firmly bullish while Wipro may be readying for some moves. Zee has rallied after a range shift in weekly but needs to work up some more momentum to the upside to vault it into bullish orbit again. NTPC is putting together an upmove, while Adani Ports seems to be readying for one.