The idea of performance cycles is built around divergence between the worst and the best. After a certain time the best and worst reverse polarity. The histogram carries a 6 month return comparative between few best and worst Nifty blue chips. SBI, ITC were the best and Suzlon, Jaiprakash and Reliance were the worst. After we ranked the stocks on performance we looked at the Rieki (performance cycles) for the respective stocks.

The difference between Rieki and a momentum oscillator is that Rieki can classify one momentum low from the other. The intermediate Rieki we have illustrated here suggests a topping performance for Hindalco (HALC), SBI and bottoming performance for Reliance, Suzlon and Jaiprakash Associates. This confirms the relative ranking view of the best and worst in the last six months.

Technically speaking, Reliance is at a key Fibonacci level and near psychological 1,000. A support here will confirm the view that Reliance has continued buying interest at current prices. Similarly Suzlon has already retraced 80% of its rise from March 2009 lows and is the worst performer. Since performance is cyclical, the real value lies in the worst. A support at current levels and a push above 60 will confirm buying interest. Idea, on the other hand, is stuck below key 0.318 Fibonacci levels. Till we see a breakout at respective resistances, we will continue to look lower on Idea.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research