Edelweiss Technical Reflection (ETR) - March 11, 2011

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Edelweiss Technical Reflection (ETR)

§  Nifty opened with a gap down in yesterday’s session but traded in a small range after that to finally close a shade below 5500. Nifty is now getting confined to a small triangle pattern with strong support at 5405. Volumes continue to decline on a daily basis characterizing the consolidation. Nifty is trading above the 20DMA at 5445, and a weekly close above it will continue the short-term uptrend. Market breadth in yesterday’s session slipped down in favour of declining stocks. Nifty 50 stocks A/D ratio was at 1:1.4. Nifty is expected to consolidate between 5400-5650 in the near-term. We advise to wait out the near-term consolidation before a strong breakout is achieved. Incase of break below 5400 on a closing basis, the index will enter a downtrend and look for a test of 5200.

§  Yesterday’s decline was led by a fall in the pivotal Metals and Banking shares. Technology stocks too came off by ~0.5%. Realty has been a clear outperformer as stocks gained nearly 0.6% for the day. BSE Realty index has made a higher high for the second consecutive week signaling a short-term uptrend for a target of 2200-2250. Bullish Setups: Infosys (INFY), SAIL, IB Real Estate (IBREL), Alstom Projects (ABBAP) Bearish Setups: HPCL, HUL (HUVR), PFC (POWF), DABUR

§  DXY has sprung up from 76.10 to make a high of 77.30 in yesterday’s session spooking risk assets across the globe. US and European equities suffered a fall of ~1.5% and are expected to close in the red for the week reinforcing the short-term bearish bias. Crude Oil has come off the highs down to $100. Momentum oscillators on Crude Oil indicate a buy on declines to $97 for a test of $111-$120 in the medium term.