Edelweiss Technical Reflection (ETR) March 28, 2011

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Edelweiss Technical Reflection (ETR)

§  Bullish strength on the Nifty continued for the fourth day in a row as it blasted its way up the 5600 barrier. The index opened with a continuation gap and notched up gains in excess of 2%, signaling an end to the five week consolidation range with a bullish breakout. Nifty has comfortably taken out the 21 and 50 day MAs, and the momentum oscillators have moved into positive territory supporting the bullish trend. Market breadth was firmly in favour of advancing stocks and the Nifty 50 A/D ratio was at a robust 9:1. Previous week’s rally is likely to extend towards 5688 from where a combination of short-term overbought oscillators and 200-DMA is likely to result in profit taking. However the overall price / momentum setup indicates the Nifty moving higher towards 5760 / 5900, with strong support at 5500 protecting the downside.

§  The market rally was led by a strong move of >4% in the IT stocks. Banking, Realty and Cap Goods stocks followed up with gains in excess of 2%. All the secotral indices witnessed a positive trend. Healthcare and Metals shares underperformed the overall market. Bank Nifty breakout should now extend the gains towards 12000 (61.8% retracement of the November – February decline).

§  Bullish Setups: RIL, SESA, BOB, Voltas (VOLT), Ambuja Cem (ACEM), DLF

§  Bearish Setups: Maruti (MSIL), Siemens (SIEM), Balrampur Chini (BRCM)

• Global stocks rallied smartly in the previous week breaking the two weeks losing streak. The near-term outlook has improved with the SPX closing above 1300 (DJIA above 12000) and should likely extend to test the year’s highs. DXY has formed a ‘Piercing Line’ candlestick pattern on the weekly chart indicating upside risks in the near-term.