Edelweiss Technical Reflection (ETR) March 7, 2011

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Edelweiss Technical Reflection (ETR)

§  Nifty opened on Friday with a big gap and cruised above 5600 in the opening hour, but multiple resistances led to sharp profit taking closing the gap. At the end Nifty ended with a marginal gain for the day and a 4.4% gain for the week. The index maintains the formation of higher tops and bottoms since making a low of 5232. The hourly momentum oscillators have rolled bullish signaling further profit taking in the earlier part of the week. Daily oscillators on the other hand are comfortably in buy mode. Market breadth was in favour of declining stocks for the second time. Whereas the Nifty 50 stocks A/D ratio turned neutral at 1:1. The index indeed found resistance at 5600 suggesting a decline down to test the hourly moving averages. The short-term uptrend remains intact as long as 5420 remains inviolate on a daily closing basis and one can look to intimate trading longs on decline down to 5465-5450. From a medium term perspective, a trade above 5650 will lead to a sustained upmove.

§  Sectoral moves continued to remain mixed for the second session in a row. Cap Goods stocks witnessed strong selling activity losing 2% for the session. Marginal buying was seen in Banking, Autos and IT shares. BSE Realty index has made a higher top and bottom on the weekly chart suggesting first signs of reversal in the medium term. Bullish Setups: RPower (RPWR), Hero Honda (HH), Bank of India (BOI), Shriram Trans (SHTF), Cairn (CAIR) Bearish Setups: Mundra Port (MSEZ), BPCL, Punj Lloyd (PUNJ)

§  Developed markets equity indices ended mixed for the week as the momentum oscillators suggest declines in the coming week. Asian indices on the other hand ended with good gains indicating short-term strength. Gold has broken above the previous all-time high of $1430 well in an uptrend towards the $1550 mark. Crude Oil has broken through the $102 (61.8% retracement of the 2008-09 bear market), leading to an extension of gains towards $111-$120.