Chart reading: Can Nifty Auto and Nifty Pharma catch up with benchmarks?

The Nifty50 index has risen 8.30 per cent to 10,860 and Sensex has gained 8.74 per cent to 36,200 from their November lows of 10,004 and 33,291, respectively. However, Nifty Auto has risen only 4.73 per cent while the pharma index Nifty Pharma has climbed 5.49 per cent from their respective lower levels. Both the Nifty indices are substantially trading below their crucial moving averages. The technical indicators of both the indices indicate lag in strength and crossover, especially MACD (moving average convergence and divergence), which is trading below the zero line.

Nifty Auto: The index was in consolidation phase between November 2018 to mid-December 2018. The index broke resistance of 9,350 level, however, it failed to move higher due to low follow-up buying, chart suggests. The breakout rose towards high of 9,579 before breaching 50-day moving average (DMA) of 9,060 on the daily chart. The current level of 8,900 are below the said moving average, which is a sign of weakness for the index.

The weekly chart indicates resistance around 9,600 (its 50-weekly moving average), coincides with 100-DMA on the daily chart. The trendline support comes at 8,780 ahead of the monthly level of 8,500.

Nifty Pharma: The index has a clear breakdown of descending triangle on the daily chart. The Nifty Pharma Index is trading well below all the moving averages - 50-DMA, 100-DMA and 200-DMA. The index formed ‘Death Crossover’ with 200-DMA crossing over 50-DMA. The immediate resistance comes at 8,950, a decisive close may lead to 9,060, its 50-DMA on daily chart. The index is lagging with volumes that could drive the index higher, the chart suggests.

The weekly chart indicates trend line resistance of 8,900. The index needs a strong close, followed by subsequent buying for the coming week. The monthly chart shows steep fall with negative candles from the level of 10,786 to 8,417, an approximate 21 per cent correction. A recovery cannot be ruled out as per technical chart.