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Sector Technical Watch

A periodical technical report on Banking & IT sectors

August 08, 2015

Nagaraj S. Shetti
nagarajs.shetti@hdfcsec.com
Tel-022-30750021

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Sector Technical Watch - August 08, 2015

CNX IT: Minor upmove is likely for near term, but the sector is expected to find stiff overhead resistance around 1180011900 levels and the decline is likely from the higher levels.

CNX IT daily timeframe

CNX IT weekly timeframe

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Sector Technical Watch - August 08, 2015

Current Observation:

Daily Timeframe: The IT sector has bounced back from the initial support of 50day EMA (blue curvy line)
around11280 and moved up in the positive sequence of HT and HB.

Currently the sector is facing a strong overhead resistance line (green horizontal line) as per the concept of change in
polarity around 11835 levels. Previous couple of attempt to move above that hurdle have been failed and it led to
down ward correction from the highs.

The current minor consolidation of the last couple of sessions is suggesting that there is a possibility of yet another
upside bounce back and revisit of the overhead resistance for near term.

Daily momentum oscillator like 14 period RSI has been making continuous attempt to move above the key upper
area of 60 levels.

Among major sector participants, Infosys, TCS, Wipro and HCL Tech are showing sideways consolidation movements
without any clear direction of the trend. Other participants like, Tech Mahindra, Cyient, Just Dial, Naukri, Mindtree
are either moving in sideways consolidation or showing weakness from the highs.

Weekly timeframe: We observe a larger horizontal band (green dashed horizontal lines) movement in IT sector as
per weekly timeframe chart around 11800-10900 levels. Currently, the sector placed near the upper band of the
horizontal band pattern.

There is a repeated formation of long upper shadows near the upper band around 11800 levels, which is indicating
an emergence of selling interest from the higher levels.

We also observe a bullish spring pattern during mid of July (spring-the sector pierced below the lower band around
10900 and sprang back immediately, suggesting false downside breakout) and its upside target of upper band has
been achieved.

If the IT sector once again makes false upside breakout of upper band (by piercing just above the upper band and
reversing down), then the expected pattern could be considered as a bearish upthrust and that could eventually
open up the potential downside target down to the lower band.

The short term momentum oscillator like 14 period ROC has been forming larger sequence of lower highs over the
last many months and currently placed near the lower high of around 5-6 levels. Such formation of lower highs are
indicative of lack of strength in the upside momentum of the sector at the higher levels. This is not a good sign for
bulls to sustain at the higher levels.

Summing Up:

The underlying trend of IT sector as per smaller and larger timeframe is slight positive and the sector could face the
strong overhead resistance of around 11800-11900 levels, on any upmove from here.

There is a possibility of minor upmove initially, but the likelihood of showing false upside breakout of the overhead
resistance is high in the next 1-2 weeks. A false upside breakout could possibly lead to a higher levels sell off and the
weakness initially down to 11400-11300 levels in the next couple of weeks.

One may look to create short positions in IT major and mid cap stocks on the event of sectors showing false upside
breakout and then look of a reasonable lower levels for near term.

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Sector Technical Watch - August 08, 2015

NSE Bank (Bank Nifty): Minor upmove is likely for near term, but the strong overhead hurdle around 19150-19200 levels
is going to be crucial to continue with upside momentum.

NSE Bank daily timeframe

NSE Bank weekly timeframe

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Sector Technical Watch - August 08, 2015

Current Observation:

Daily timeframe: After a sharp upmove in last week, the Banking sector (Bank Nifty) shifted into sideways
consolidation during this week by moving within a tight high low range (19103-10758 levels).

The Banking sector is currently showing sideways consolidation movement just below the key resistance of down
sloping trend line (brown line connected from the top of 20907-28th Jan-15) around 19000 levels. The underlying
sector showing lack of sharp selling after hitting the key hurdle is slightly positive and this could eventually lead to
show upside breakout of the consolidation for short term.

Daily RSI has been showing consolidation below the key upper area of 60 levels. Over the last 6-7 months, the daily
RSI was not able to move up to its upper bullish range 70-75 levels and the recent peak of RSI was around 65-66
levels. This is signaling that the upside momentum in the banking sector is not picking up at higher levels. Unless the
daily RSI moves/sustains above 60-65 levels, the strong upmove in the sector is ruled out.

Major sector participants like SBIN, Axis Bank, ICICI Bank, Yes Bank are all currently consolidating at higher levels.
Other banks like, Federal Bank, Canara Bank, BOB, IndusInd Bank, BOI are all either showing declines from the
highs or into a sideways consolidation with weak bias.

Weekly Timeframe: After showing a smart recovery from the lower levels of 18175 levels, the banking sector was not
able to witness sharp upmove and closed this week with small w-o-w gains.

The banking sector was not able to sustain above the important higher levels of around 19150 levels, which is the
upper boundary of larger consolidation and high of previous bearish engulfing pattern of mid to later part of July and
the upper Bollinger band. The sector sustaining only above 19150-19200 levels could have positive impact on the
underlying trend ahead.

Bollinger band has started to show squeeze pattern (narrowing of upper and lower Bollinger bands) and this is
indicative of lower volatility expectation. The squeeze pattern normally leads to the opening up of bands in either
side, which results in volatility breakouts (either up or down).

Weekly momentum oscillator like 14 period RSI has been heading upwards to the key upper area of 60 levels
(currently placed at 55 levels).

Summing Up:

The underlying trend of Banking sector (Bank Nifty) is slightly positive and minor upmove is expected by next week.
But the prevalence of strong resistance of around 19150-19200 levels could possibly dampen the effort of bulls to
scale higher levels. There is a possibility of higher levels selloff in banking sector from near the cluster resistance
area.

One may continue with long positions in banking sector for short term and look to exit the long positions around the
abovementioned overhead sector resistance. If the banking sector sustains above 19250 levels by next week, then
one may expect further upmove in the sector for near term.

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Sector Technical Watch - August 08, 2015

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Sector Technical Watch - August 08, 2015