7 Feb 2011; Edelweiss Technical Reflection (ETR)

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Edelweiss Technical Reflection (ETR)

§  Nifty plunged in the later half of Friday’s session after it was unable to cross above the 50- hourly EMA convincingly, closing the week in the red for the second time. The index has made a ‘bearish outside bar’ on the daily chart, but the efficacy of the pattern in questionable at such lower levels. Daily RSI is at oversold territory and showing positive divergence. Market breadth improved turned strongly in favour of advances; while the Nifty 50 stocks A/D ratio was a dismal 1:49. Since the index is a shade above the very crucial 5350 support, the market is likely to bounce off after a test of the same. Initial rally is expect to face resistance at 5500, but can extend towards 5625. Incase of a failure to hold 5350, the index can enter into a sharp decline towards 5200.

§  None of the sectoral indices saw green on Friday as panic set in. Realty and FMCG belonged to the biggest loser category, followed by IT and Banking. Bullish Setups: Fortis Healthcare (FORH), Tata Steel (TATA), SBI, Bearish Setups: Ambuja Cements (ACEM), Mahindra & Mahindra (MM), Tata Power (TPWR)

• Developed world equity indices are trading near yearly highs however there is a risk of a downturn on loss of momentum. USD-INR faces resistance at the two year declining trend channel at 46 that can drag it below 44.50 in the near-term.