Edelweiss Technical Reflection (ETR) March 30, 2011

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Edelweiss Technical Reflection (ETR)

§  Nifty extended the gains for the sixth session in a row as it completes 50% retracement of the four month corrective phase starting November 2010. The index has blasted past the 200-DMA (5693) and even managed a close above 5700 reaffirming the strong bullish bias. The final hour witnessed profit sales leading to a minor drop from the intraday high of 5770. Hourly charts were warning of a minor correction as the oscillators have rolled bearish after giving negative divergence signal, and the market breadth coming off in the past two sessions. Nifty 50 stocks A/D ratio continued to remain firm at 4.5:1, but that should be under threat for couple of trading sessions. As we approach the final two sessions in the March series derivatives expiry, volatility should be on the boil. We reiterate a minor consolidation (sideways/corrective activity) to test the hourly support at 5670, before resuming the uptrend for a target of 5900 (61.8% retracement of the November to February correction).

§  Sectoral indices managed to hold on to gains despite a rise in volatility in the second half. Autos and Telecom stocks were the major gainers, followed by good participation from Metals shares. Banking & Realty stocks corrected from day’s high suggesting a minor correction in the coming sessions. Cap Goods, FMCG and Oil & Gas stocks belonged to the underperformers list. BSE Midcap index continues to stay under the downward sloping trend line resistance of 6800. A break and close above will result in a bullish breakout will propel it towards 7175.

§  Bullish Setups: RIL, Dr Reddys (DRRD), Power Grid (PWGR), SESA, ADE

§  Bearish Setups: Tech Mahindra (TECHM), GAIL, TGBL

§  US markets have resumed the northward journey after a day of pit-stop. DXY has formed a ‘Piercing Line’ candlestick pattern on the weekly chart indicating upside risk towards 77.40 in the near-term.