Jan 27: Edelweiss Technical Reflection (ETR)

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Edelweiss Technical Reflection (ETR)

Nifty continued its dream run of forming higher highs and higher lows in the short-term with yet another session of gains. The index opened marginally higher and after the initial round of profit taking, there was a steady climb towards the intraday high of 5174. The final half hour selling led the Nifty to settle at 5158, as a result forming a‘doji’ candlestick pattern. With the 200 DSMA in sight at 5208, markets are most likely poised to test the critical resistance which has been a turning point for the market in the previous two occasions. Market internals indicate a higher turnover and an A/D ratio of 2:1. The momentum indicators are now giving signs of caution as the daily reading have reached overbought territory and the hourly setup is showing negative divergence indicating that this is the final stage of the current upcycle before a sustained retracement sets in. It is advisable to aggressively reduce long positions and perhaps accumulate shorts at 5200 levels with a stop-loss of 5290 (trend line resistance from the November 2010 high) for targets of 5000 and 4900.

Trend among the sectoral indices was mostly positive with the exception of Cap Goods that was down 0.33%. The top performing sectors of the day were Metals (+1.79%), Auto (+1.15%) and IT (+1.06%). The broader markets witnessed strong activity with the Mid-cap and Small-cap indices gaining 1.25% and 1.11% respectively.

Bullish Setups: TATA, DRRD, HDFCB, JUBI

Bearish Setups: INFY, LT, ICICIBC