July Monthly Chart Updates

JC Parets
August 1, 2018

It's the end of the month, which means we've got new monthly charts. Last month we discussed the strength in large-cap Financial Services, Consumer Goods, IT, and in certain areas of Pharma, while the weakest areas were mid and small-cap Infrastructure, Metals, Commodities, Realty, Media, and Autos. This post is going to discuss any significant changes from last month, but members can find the rest of the updated charts in the Chartbook.

The strength in large-caps continues, as shown by the Nifty 50 making a new all-time closing high. This month's candle opened at the lows and closed at the highs, signaling a continuation of its uptrend after 6 months of consolidation. If prices are above 11,165 we want to be long as our next price objective us up near 15,260.

The Nifty 100 closed at new all-time highs, opening at the lows and closing at its highs. If prices are above 11,200, our price objective remains 12,640.

Midcaps on the other hand continue to trade within a range, reversing higher after making new lows early in the month. There's still not much to do here unless prices can get back above 19,040, which would open up the possibility of retesting the year-to-date highs.

Smallcaps look similar, but made less progress than midcaps in making up for last month's losses. If prices get back below support at 7,335, the risk of downside toward 6,245 remains open.

In terms of sectors, what's been working continues to work. The Nifty Financial Services Index made a new all-time high. You'll notice its chart looks very similar to the Nifty 50 because it's the largest sector of the index. If this is hitting new highs, it's likely we're in an environment where we want to be buying stocks as an asset class, not selling them.

Reliance Industries Ltd. which represents roughly 50% of the Nifty Energy Index absolutely ripped this month, breaking out of an 8-month range. As long as prices are above 950, our upside target remains 1,390.

The Commodities space continues to be weak, with further downside in most metals after failed breakouts confirmed across the board these last two months. Currencies continue to trade in their multi-month ranges.

Members can view the rest of our thoughts on this month's charts here:

The Nifty Bank Index also made a new high, continuing toward its upside price objective of 39,970.

The Nifty Fast Moving Consumer Goods Index hit our upside price objective at 30,600, which now becomes our risk management level for our next target of 38,900.

The Nifty IT Index continues to inch toward our target of 15,090.

The Nifty Energy Index, led by Reliance Industries, closed at all-time highs and is back above 14,080, which suggests we want to be long with an upside target of 17,790

The Nifty Pharma Index continues to digest its strong gains from June through time, rather than price. This is exactly the type of action we want to see if we're anticipating an upside breakout from this range.

The Nifty Infrastructure Index nearly hit out downside target of 2,975 so we're back to neutral in the intermediate-term until we see how prices respond to this potential support level.

The Nifty Media Index on the other hand moved lower for its third month as it continues toward our downside target near 2,500.

Nifty Metals remain vulnerable below our risk management level of 3,460, so our downside target remains 2,850.

Crude Oil continues to digest its last years of strong gains. There's little evidence of a reversal here, so for now our risk management level of 4,670 and target at 5,500 remain intact. Further digestion would be healthy.

We continue to wait patiently for USD/INR and the other major currency pairs to break out decisively in one direction or another. Maybe next month, maybe not. We'll continue to monitor them though.

The Bottom Line: The trends we've been discussing all year continued in July, with large-caps leading and the Financial Services, Consumer Goods, and IT sectors making new highs. Some of the weakest sectors hit, or are close to hitting, our downside price targets meaning we'll have to wait and see how they react to these potential support levels. Commodities in general continue to be rangebound with the exception of Crude Oil and a few others we've written about, while currencies continue to consolidate and prepare for a big move in one direction or another.

As long as the leading large-cap sectors continue to pull the indexes higher, we'd prefer to be buying stocks as an asset class rather than selling them. With that said, not everything is working so we want to continue to look for the best reward/risk opportunities, both long and short, in the market cap segments, sectors, and individual securities that have a clear trend to take advantage of.

To view the charts above and the remainder of the Monthly Chartbook, click here. To view all of the other updated chartbooks, click here.

Thanks for reading and let us know if you have any questions.

Allstarcharts Team

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