4 Jan: Edelweiss Technical Reflection (ETR)

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Edelweiss Technical Reflection (ETR)

After a small positive close day before, the markets recouped the losses of late December by surging 2.7% in yesterday’s session. Nifty opened with a large gap up tracing the strong positive cues in global markets and gradually started building gains until the close of the session. More importantly it has managed to close above the 21 daily EMA resistance of 4745 on improving volumes and a strong A/D ratio of 5:1. On the candlestick charts a ‘bullish belt hold’ pattern (i.e. a large bullish candle where open is equal to low and close is near the high) has formed which is a continuation pattern and suggests further upside in the near term. Daily oscillators have changed course as they roll bullish especially with the MACD turning up after forming a ‘hook’ (i.e. MACD turning up after taking support of the signal line) having bullish implication. After yesterday’s price action the short-term trend has turned up with and we expect the index to test its next resistance point of 50 daily EMA at 4859. The hourly 21 and 50 EMAs that were acting as resistance points earlier will now act an import supports converging at 4690. On a larger picture the ongoing rally qualifies as a ‘technical rebound’ of the fall from 5100 to 4531 and is likely to fizzle out at the resistance levels.

All the sectoral indices ended the day in the green. Gains were led by Metals (+5%), Cap Goods (+4.40%) and Banking (+4.35%) indices, whereas defensive sectors FMCG (+1%) and Healthcare (+1.47%) underperformed the benchmark index. Broader market indices performed in line with their frontline peers with 2.4% gains each.

Bullish Setups: DRRD, PIHC, SAIL, AXSB, LT

Bearish Setups: LPC, RBXY, AL, HUVR