Edelweiss Technical Reflection (ETR) February, 24 2011

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Edelweiss Technical Reflection (ETR)

§   Nifty declined for the second session in a row breaking the short-term up trending channel (refer chart below). The decline in yesterday’s session was within the range of Monday’s session suggesting a substantial move is in the offing once that range is broken in either direction. Volatility is likely to rise on the back of monthly derivatives expiry as well the Union Budget session on Monday. Oscillators on the hourly chart have rolled bearish indicating downside risk. Daily oscillators on the other hand continue to maintain the bullish status. Market breadth favoured declining stocks however bettered previous days number. Nifty 50 stocks A/D was at a marginal 1:1.5. On break of 5413 Nifty is expected to drop sharply down to the 5340 support. However the potential ‘inverted head & shoulder’ (bullish) pattern with neckline at 5620 remains in place if the 5526 swing high is taken out.

§   Oil & Gas (RIL) and Autos (HH) outperformed the benchmark index. Rest of the sectoral indices witnessed bearish activities. Banking, IT and Realty declined the most. CNX BANK will retrace 61.8% of the recent upmove at 10515 where contrarian buy trades can be initiated with reversal below 10380.

Bullish Setups: HDFC, BOI, Rel Infra (RELI), ABAN, IGL, Dr. Reddys (DRRD)Bearish Setups: INFY, HPCL, Ranbaxy (RBXY), DLF, YES Bank

§   As per expectations, the US and European equities have entered a phase of correction on sharp declines and bearish oscillator signals. India VIX has hit the target range of 28 where some moderation down to 23-24 levels is likely. Gold, Silver and Crude are rallying on the back of strong upside momentum. Gold is on course to break past the record high of $1425, whereas Silver is likely to test $41 and Crude has touched the magical $100 mark.