July 25, 2015

Sector technical watch

A periodical report on key sectors

mentum stocks

CNX IT: - The present minor correction of the sharp upside momentum is likely to end very soon. The nearest support to
be watched for the sector to show upside rebound is around 11250-11200 levels.

CNX IT daily timeframe

CNX IT weekly timeframe

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Current Observation:

Daily Timeframe: The false downside breakout of the support around 10900 levels (lower pink dashed H-line) during
mid of June-15, led to a sharp upside bounce back in the IT sector for the next couple of weeks.

After reaching the upper horizontal band around 11785 (upper pink dashed H-line), the IT sector slipped into decline
in the last couple of sessions, indicating the occurrence of correction of the recent up move.

Daily momentum oscillator like 14 period RSI has turned down from 65 levels (failed to reach up to 70-75 levels and
current reading is 57 levels), which is suggesting that the upside momentum of current pullback rally seems to be
over and further slide in RSI and the sector is likely.

Among sector participants TCS, Wipro, HCL Tech, Mind Tree, Just Dial are showing declines after the minor upmove.
Other participants like Infosys, OFSS, Tech Mahindra are currently in an uptrend.

Weekly timeframe: The IT sector has witnessed a fine upside bounce back in the last two weeks, after showing a
false downside breakout during mid of July. But the sector was not able to close near the weeks high this week.

The formation of long upper shadow around the resistance of 11800 levels is indicating an emergence of strong
selling interest from the higher levels.

The IT sector has witnessed a sharp upside breakout of the down trend line resistance (brown down trend line
around 11175 levels), currently is showing correction from the highs. This could possibly lead to a minor weakness in
this sector for next week.

Weekly short term momentum oscillator like 14 period ROC has turned up from below the equilibrium line by showing
positive crossover signal (ROC line cutting above its signal line). This indicating the strength of upside momentum as
per larger timeframe chart.

Summing Up:

The sharp upside momentum in IT sector in the last couple of weeks is indicating a building up of strength to move
up further as per larger timeframe chart. The minor correction of smaller timeframe is likely to be end near the
support of around 11250-11200 levels and the sector is expected to show bounce back after the dips.

One may look to create fresh long positions only from near the lower levels supports (buy on dips strategy) for a
reasonable bounce back from the lows.

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NSE Bank (Bank Nifty): The sector seems to have formed a top reversal pattern as per smaller and larger timeframe
chart. The prevailing negative pattern could have a bearish impact on this sector at least for the next couple of weeks.

NSE Bank daily timeframe

NSE Bank weekly timeframe

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Current Observation:

Daily timeframe: The banking sector was not able to sustain above the overhead resistance of around 19000 levels
(brown horizontal line) after showing sharp upmove and slipped into decline. This is suggesting a false upside
breakout of the hurdle.

Currently, the sector has broken below the immediate support of ascending trend line (green dashed H-line) and
closed below it. This could be an indication of the formation of top reversal pattern around 19230 and beginning of a
correction from the highs.

Daily downswing indicator like DMI gained its dominance and daily trend strength indicator like 13 period ADX is
now placed around the key lower levels of 14. This pattern is suggesting that the down swing of banking sector is
gaining strength and this weakness could possibly turn out to be a down trended move for some time.

Major sector participants like HDFC Bank, Kotak Bank and Indusind Bank are showing some resilience and they are
still holding at the higher levels. Other major banking stocks like SBIN, ICICI Bank, Axis Bank, PNB, Canara Bank,
Yes Bank are all currently showing fresh weakness after moving into minor upmove or sideways consolidations. Mid
cap and PSU Banking stocks like BOI, OBC, Bank of Mah, IOB, Andhra Bank, Dena Bank, KTK Bank, ALBK, Union
Bank, Syndicate Bank are all showing weakness from the higher levels.

Weekly Timeframe: The sharp upmove of banking sector of the last 4-5 months seems to have completed as the
sector declined sharply in last week.

We observe a formation of horizontal band movement (green horizontal parallel lines) over the last few months and
this is called as a spring and up thrust patterns. During mid of June the sector moved up sharply after just violating
the down parallel line (bullish spring pattern) and its upside target of upper parallel line was achieved around 19000
levels recently.

Currently, the sector has turned down from the upper band by showing false upside breakout (just piercing the upper
line and this is considered as a bearish up thrust pattern) and this is negative for the sector. The downside target of
this pattern could be labeled around 17230 levels, which is lower end of the band and this could possibly be achieved
in the next 4-5 weeks.

We also observe a formation of negative candlestick pattern of bearish engulfing around the strong overhead
resistance. This is indicating a possibility of a formation of top reversal pattern in Banking sector.

Summing Up:

The overall chart and momentum pattern is signaling a beginning of fresh decline after the formation of top reversal
pattern around 19230 levels, as per smaller and larger timeframe chart. One may expect banking sector to decline
down to 18000-17900 levels in the next 2-3 weeks and the next around 17250 levels (4-5 weeks).

One may look to create short positions in banking major as well as mid cap /PSU banking stocks for a reasonable
decline over the next 2-3 weeks.

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Technical Research Analyst: Nagaraj Shetti (nagarajs.shetti@hdfcsec.com)

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HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East),
Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com
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