Edelweiss Technical Reflection (ETR)
- It was a dramatic day of trading yesterday as the index opened of a softer note, traded gradually lower to make a new low of 5963 (10 daily EMA support), and then rally sharply higher in the last hour to cover up the day’s losses and close near the high of the day, above the psychological 6000 mark. Momentum oscillator MACD has moved below the zero line on the hourly chart indicating downside risk in the coming sessions. On the daily chart however, it remains in the positive territory with a buy signal. Market breadth was in favor of declines for the third consecutive session posing a threat to the short-term trend. Nifty breadth ended positive at 1.4:1. The index has now closed in the positive for the fourth consecutive month and seventh consecutive quarter indicating the bullish nature of the medium / long-term trend. As long as it manages to hold the bid above 6018 (closing basis), a move towards 6120 – 6205 is on the cards in the seasonally volatile October series. Risk to the downside will be heightened only on a breach of supports of 5950-5900.
- The late market recovery was due to the rally in FMCG, Banking, and Metal counters. Oil & Gas, Consumer Durables and Autos contributed to the loss. RIL has now closed below 990, opening a risk for test 965. Banking, Realty and Cap Goods stocks are among potential leaders to rally on the upside. Bullish Setups: DLFU, NTPC, LITL, MM, ICICIBC, WPRO.
- Globally, most western indices are closing the quarter in positive, setting the base for a rally in the next quarter. The short term developments will challenge the immediate upside, but a medium term picture looks healthy. Gold has retreated from higher levels to trade near $1300. Target of $1340 remains intact. Crude has nearly achieved the channel target of $80, and a weekly close above it will trigger a rally towards $87. DXY has made an ‘outside bar’ signaling a potential short-term reversal sign.
§ Interesting chart setups: DLF, LITL, ICICIBC, CIPLA
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