Edelweiss Technical Reflection (ETR) Dec 19

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Edelweiss Technical Reflection (ETR)

Indian markets dropped to a two year low on Friday after a surprise collapse in the second half. Earlier in the day the Nifty had rallied smartly above the 4800 mark and was consolidating higher, but inability to break past the 50 hourly EMA at 4819 resulted in the sharp u-turn that sinking Nifty below the year’s previous low of 4639. The index has closed at the lowest point of the year at 4651 and is poised to lose further ground going forward. There has been a breakdown of a ‘head & shoulder’ intermediate top on a closing basis that points to a target of 4400. The breakdown in prices is supported by the momentum which has gained strength on the way down depicted by the bearish crossovers on various oscillators. Friday’s session witnessed a high turnover and an extremely weak market breath with and A/D ratio of 1:3 indicating a broad-based sell-off. The long trade recommended on Friday has been stopped out as we look for further weakness for the Nifty. Immediate near-term support comes in at 4610 / 4620 (at the trend line joining previous two lows), the break of which signals to the H&S target of 4400. Short-term upside is now capped at 4720 (earlier support cluster)

All the sectoral indices ended the day in the red. Among the worst hit were heavyweight Cap Goods (-4.36%), Realty (-3.34%), Banking (-3.16%) indices. Healthcare (-0.36%) and Autos (-0.75%) although closed in the red, managed to outperform the market. Broader markets were relatively worse hit than the frontline peers as the Mid-cap and Small-cap stocks ended with losses of -1.72% and -1.60% respectively.

Bullish Setups: DRRD, PIHC, DITV

Bearish Setups: HCLT, LPC, RBXY, AXSB