Edelweiss Technical Reflection (ETR) - March 21, 2011

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Edelweiss Technical Reflection (ETR)

§  Following the previous day’s weakness, the index dropped sharply on Friday breaching the crucial 5400 support mark. On opening the index resisted at the 50-hourly EMA and immediately went into a tailspin. In the final hour the selling was persistent leading the index to close at the low of the day. Hourly oscillators as well as hourly MAs have given a sell crossover. Daily MACD is turning trajectory from the zero line indicating a fresh down cycle is likely to begin. Market breadth was strongly in favour of declining stocks and the Nifty 50 stocks A/D ratio too was weak at 1:7. Nifty has closed in the red for the second week in a row signaling weakness in the short-term trend. A break below 5300 will confirm the weakness and lead to a triangle pattern breakdown that will take Nifty down to 5000. On the other hand a push higher towards 5500 and above will result in momentum accelerating upwards. For the momentum Nifty carries risk on the downside.

§  Oil & Gas, Autos and Realty shares witnessed strong selling dragging the benchmark index lower. Metals and FMCG stocks weathered the storm by falling <0.5%. BSE Metals index is 2.75% above its bullish pivot of 14850. It will be interesting to watch the index trade near the level for a substantial move.

§  Bullish Setups: RCOM, Voltas (VOLT), Ambuja Cem (ACEM), Tata Comm (TCOM)

§  Bearish Setups: HUL (HUVR), Wipro (WPRO), HPCL, BOI, Jet Airways (JETIN)

§  Developed market equity indices staged a pullback move for the second consecutive day. The short-term trend has turned down, thus rallies will face strong supply going forward. WTI Crude Oil continues to stay above $100 increasing the upside risk in the near-term. We expect it to move towards $111 on bullish price structure. Currency markets are once again on the move as the EUR-USD approaches its most crucial challenge at 1.435 in the current uptrend.