Diverging since 30th Nov: CNXAUTO

12 ธ.ค. 2023

I was taking a look at the ratio charts of sectoral indices to identify which sector though is going up but in relative terms is slowing down. The one that looked the cleanest is that of CNXAUTO.

1. On the LHS, we have the daily chart of CNXAUTO and on RHS a ratio chart of the AUTO index with CNX500.

2. One look at the blue and red zone, and you can see that since 30th of Nov’23 the CNXAUTO index per se has rallied, but the ratio chart has come down. This means that the rally has underperformed the rally of the broader market.

3. Is this a sign that the AUTO stocks will now correct? Need not be the case, but we can clearly confirm from these readings that the AUTO sector is likely to slow down, which means we are either headed for a consolidation or correction.

4. Considering the fact that the AUTO sector with the overall market is in a strong UP trend, I request not to go contra short blindly, but wait for enough signs of reversal, like a proper well-established divergence based on which you can attempt a sell trade.

5. If you are not into shorting, then do not look to go aggressively long on the AUTO pack at this juncture. Work on your stop losses if you have open positions and wait for better/ lower levels to accumulate.

Trade Well.