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§ The final session of the year 2010 ended on a volatile yet bullish note, closing near the day’s high, and setting the tone for the New Year. Nifty has returned and ~18% annual gain for 2010 in what was a challenging and volatile year for the market. It has managed a positive weekly and monthly close, the eighth consecutive quarterly positive close and the second consecutive yearly positive close, indicating the strong uptrend that the market continues to be in. Momentum oscillators continue to build on the strength on the daily chart. The weekly RSI has triggered a buy signal reinforcing the bullish bias. Market breadth for the previous session was dominated by advancing stocks. Nifty 50 stocks A/D ratio was robust at 2:1. After confirming the ‘double bottom’ reversal, Nifty continues to build on the strong momentum and price action. The target for the breakout is set at 6300-6450, however in the immediate short-term it is approaching a cluster of resistance of 6135-6155 from where a bout of corrective action in expected. It is prudent to remain long and also look to initiate buys on declines to 6050 with a reversal below 5900.
§ Friday’s up move was led by a strong rally in Realty, Banking and Auto shares. IT shares witnessed profit taking after a strong and smart rally. Bank Nifty has given a breakout above a descending trend channel and the retracement is likely to take it back to 12,000 levels. Realty shares are moving up on strong short-term momentum; BSE Realty Index can retrace the fall upto 3060. Bullish Setups: PLNG, DIVI, ABAN, JSP, BHARTI, HDFC, HNDL, UT, TATA Bearish Setups: KMBH, DRRD, RPWR, TTSL
§ Commodities have outperformed all other asset classes in 2010, giving phenomenal returns. Precious Metals and Industrials and Softs are likely to outperform in the coming quarter as well. Most equity indices of the developed and emerging world are closing the year on a positive note, and will continue to attract capital into the first quarter of the New Year. The Euro is expected to stage a short-term rally towards 1.36.
§ Interesting chart setups: TATA, ABAN, LT, PLNG
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