Edelweiss Technical Reflection (ETR) § :Apr 27, 2011

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Edelweiss Technical Reflection (ETR)

§  After opening on soft footing the index soon slipped below previous days low and heavy selling activity took it below 5800 momentarily. In the last couple of hours Nifty witnessed a smart recovery from the 20SDMA that acts a short-term trend pivot. Nifty has formed a long lower shadow candlestick on the daily chart which suggests that near-term selling has exhausted and the market is back in balance. Hourly MACD that had triggered a sell crossover has turned back from the zero line and the Nifty has broken above the 21 and 50 hourly EMAs. Market breadth continued to remain in favour of declines for the third session. Nifty A/D ratio was neutral at 1:1. Under the current volatile backdrop we continue to maintain a positive bias and look for a break out of the 5900-5945 barrier in the near-term. Downside to 5800 will now be cemented after yesterday’s decline.

§  Sectoral trends ended mixed as the late recovery helped the defensive shares like Healthcare and FMCG to close in the green. Selling persisted in Oil & Gas, Realty and IT shares. Small-cap and Mid-cap shares mildly outperformed the larger peers. The BSE Healthcare index has shown a positive trend in the past one month, and after taking support at the 21 and 50 daily EMAs around 6060, the index is ready to resume the uptrend for a target of 6415 (61.8% retracement of the Nov-Feb decline).

§  Bullish Setups: BHARTI, Hindalco (HNDL), LUPIN, Union Bank (UNBK), LANCI

§  Bearish Setups: PFC (POWF), NCC, United Spirits (UNSP)

§  US stocks have registered a new 52-week high (SPX breaking past 1344) as we maintain our focus on the index testing the 1385 resistance in the current uptrend. We continue to have a cautious stance on commodities as they remain remain vulnerable to sudden declines. DXY is gradually drifting lower after the break of crucial supports in the previous week. Expect it to grind down to 72 levels in the coming weeks.