March 31, 2011 Edelweiss Technical Reflection (ETR)

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Edelweiss Technical Reflection (ETR)

§  The buying activity in the Indian markets seems relentless as the Nifty stretches its winning streak for the seventh session in a row, previously seen in October-November 2010. The index has closed at striking distance from 5800, which should be achieved in today’s session.  Hourly momentum indicators as well as the daily Stochastic Oscillator (5,3,3) have triggered a sell signal which could keep substantial gains in check. Market breadth improved strongly in yesterday as mid / small cap stocks will be in focus on financial year end activity. Nifty 50 stocks A/D ratio ended firm at 3:1. As we approach the final session of the March series derivatives expiry, volatility should be high. The markets are firmly on course to achieve 61.8% retracement (5900) of the November-February correction which will offer best opportunity to take profits and initiate some speculative shorts.

§  Barring the FMCG stocks, trend among the other sectoral indices was upbeat. Realty shares were in the limelight notching up >3% gains, followed by firm trend in Healthcare and Banking stocks. BSE Midcap index has achieved the downward sloping trend line breakout of 6800 which will now propel it towards 7175.

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

§  Bearish Setups: Tech Mahindra (TECHM), TRE, 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.