Edelweiss - March 23, 2011-ETR

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Edelweiss Technical Reflection (ETR)

§  The index traded higher in yesterday’s session taking the help of positive global cues and maintained the gains to finally close above the 5400 mark. The pullback was most likely after the index tested the min falling trend channel support at 5350. Hourly momentum oscillators have rolled bullish, whereas daily oscillators point lower; suggesting the rebound rally is likely to face supply at 5435-5450 resistance. Declining trading volumes continue to remain a concern and could result in a prolonged range trade. Positive market move resulted in breadth returning in favour of advancing stocks. Nifty 50 stocks A/D ratio was extremely strong at 9:1, indicative of the blue-chip bias. We reiterate the range trade nature of the market is expected to continue further until a decisive break out is achieved.

§  A positive trend was witnessed in all the sectoral indices yesterday. Interest rate sensitive Realty and Autos rebounded after small declines. IT and Banking remained rather subdued. CNX IT index has triggered a break of a ‘head & shoulder’ top pattern indicating downside risk towards 6400 / 6200.

§  Bullish Setups: Voltas (VOLT), Ambuja Cem (ACEM), REC, Skumars (SKNL)

§  Bearish Setups: HUL (HUVR), CNXIT, Hindalco (HNDL), Hero Honda (HH)

§  Stocks in US and Europe retreated on the back of strength returning to DXY. The gains on DXY are expected to be short-lived after it broke below early November 2010 lows of 75.65. WTI Crude Oil is slowly inching towards the near-term peak of $106.95, and will eventually break higher for a test of $111. India VIX has dropped below the 20-DMA (24.75) and will now take support at 21.30 (lower Bollinger band).