Large-caps in India have been on a tear relative to their small and mid-cap counterparts, which we’ve spoken about at length over the last few months. With that said, it’s no surprise to see that the Nifty 50 is leading to the upside once again by clearing its recent range on an absolute basis and making new 5-month closing highs.
We’ve talked about why we love big bases in prior posts and Copper certainly falls into that category as it’s done nothing since 2011. The reason Copper is relevant today is because it’s confirming a breakout from its 7-year base by hitting 4+ year highs and clearing resistance near 470-475. From a risk management perspective our risk is very well-defined as we only want to be long above 470 and a price target of 588 means the reward/risk is ridiculously skewed in our favor.
Click on chart to enlarge view. [Read more…]
Equal-weight indexes are one of the most valuable tools we use here at Allstarcharts. They provide a perspective on the overall strength or weakness of an index’s components that’s not otherwise seen in the cap-weighted version. The confirmation or divergence signals generated by comparing the two often acts as a leading indicator, letting us know whether the cap-weighted index’s move is supported or if we should be on the lookout for a potential reversal.
Below we’ve created an equal-weight Nifty Auto index in blue, which is constructed by assigning the same weighting to each of its 15 components. We’ve plotted it against the cap-weighted Nifty Auto index in green.
Click on chart to enlarge view.
The Financial Services, Energy, IT, and Consumer Goods sectors remain the leaders, while smaller sectors like Pharma and Media continue to lag the broader market. Our chart of the week is sticking with that theme by looking at the Nifty Metals and Nifty Infrastructure indexes, which collectively represent roughly 9% of the Nifty 500. Although these sectors have been consolidating near all-time highs for most of this year, recent developments suggest they may be vulnerable to further downside.
As Technicians we like to use the phrase “the bigger the base, the higher in space” when talking about breakouts from consolidations. Long periods of indecisive price action build a lot of potential energy that is then released once a stock breaks out of its range. This applies to any asset class on any timeframe because the psychology behind the pattern is exactly the same. We’ve written about bases before and they’re common in our work, so click here if you’re interested in learning more about this pattern. [Read more…]
The Indian Financial Services sector is broken down into three formal sector indices: The Nifty Financial Services index, the Nifty Bank index, and the Nifty Public Sector (PSU) Bank index. Both the Nifty Financial Services and Nifty Bank index have been showing great leadership, sitting just off their all-time highs on both an absolute and relative basis, however, the Nifty Public Sector Bank index has not participated to the same extent. [Read more…]
One of the most recent developments that stands out among the sector rotation that we’re seeing is the strength in IT Stocks. We’re seeing a breakout on the NIFTY IT Sector Index and we’re seeing that IT Sector Index breaking out relative to the NIFTY500. So in other words, we’re seeing massive breakouts on both an absolute and relative basis. Those are characteristics of uptrends, not downtrends.
Today we’re focusing specifically on the NIFTY IT Index and how it’s doing compared to the rest of the market. You can see here how the NIFTY IT Index is breaking out to new all-time highs and now holding above the former highs from 2015. If we’re above that former resistance we want to be very aggressively long IT Stocks: [Read more…]
If you look through all of the commodities on the Multi Commodity Exchange of India I think you’ll find more opportunities today than at any point in the past year. I’m finding the best risk vs reward propositions in the metals and energy space specifically, not just in India but all over the world.
Today we’re taking a look at Gold specifically because I think it offers one of the best risk vs reward propositions on the entire exchange: [Read more…]