Edelweiss Technical Reflection (ETR) § April 4, 2011

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Edelweiss Technical Reflection (ETR)

§  The eight session marathon up move took a breather on Friday as participants looked to take profits off the table going into the weekend. Nifty recorded its second weekly positive close with 8% gains in the past two weeks. For the day the index traded in a range of 50 points as the action shifted to broader markets. Overall market breadth was firmly in favour of advancing stocks and the Nifty 50 A/D ratio ended neutral at 1:1. The breakout above 5600 has resulted in an unrelenting and strong up move that has managed to clear all near-term resistances with ease. However one should be cautious of imminent selling around 5900-5940 which could drag Nifty down to 5700. On a break and close above the resistance cluster the index has the legs to stretch the gains up to 6100 (78.6% retracement of the Nov-Feb decline).

§  Realty shares witnessed healthy gains of 2.6%, followed by good gains in Metals stocks. Financials shares underperformed the market and so did Oil & Gas stocks. The broader market participation is clearly evident. BSE Midcap index has sustained the breakout of 6800 which will now propel it towards 7175. BSE Smallcap index too has triggered a breakout above 8100 for a target of 8950.

§  Bullish Setups: RIL, Tata Steel, Power Grid (PWGR), BHEL, Suzlon (SUER)

§  Bearish Setups: Asian Paints (AP), Core Projects (CPTL), Tech Mahindra (TECHM)

§  US equity markets recorded a second week of gains with DJIA breaking to a new yearly high above 12400 and SPX on the verge of doing so. The coming week beckons higher levels for these markets as the short-term momentum shifts in bullish zone. WTI Crude Oil has clearly signaled a breakout by moving above $106.95 and should now target $120. USD-EUR consolidates below its crucial breakout point 1.432 that will eventually trigger a global risk asset rally.