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Technical Picks | February 18, 2012

Bulls in cruise control as bears lose all hopes of a decline
Sensex (18289) / Nifty (5564)
The week began on a quiet note, in-line with global cues. During the initial part of the week, markets remained in the mentioned trading range of 17579 - 17890 / 5322 - 5428 However, on 5428. Wednesday's session, indices opened well above the upper level of the range and convincingly confirmed a break out. This positive momentum lasted till the end of the week and indices tested the mentioned level of 18440 / 5552 On the sectoral 5552. front, Realty, Banking, Capital Goods and Consumer Durables sectors contributed heavily in this week's rally, whereas Oil & Gas counters remained under pressure. The Sensex ended with a gain of 3.05%, while Nifty gained 3.39% vis-à-vis the previous week.
Source: Falcon

Exhibit 1: Sensex weekly chart

Exhibit 2: Sensex daily chart

Pattern Formation
On the Weekly chart, indices have closed well above the "Horizontal Resistance Line" placed at 17908 / 5400 level. The 200-day SMA and 20-day EMA have now shifted to 5306, 17210 / 5172 and 17522 / 5306 respectively. The "RSI-Smoothened" oscillator on the daily chart is still placed in extreme overbought territory. The daily chart depicts a "Spinning Top" Japanese candlestick pattern.
Source: Falcon

a closing below the low of the pattern i.e. 18234 / 5545 In 5545. this scenario, we may witness a loss of current positive momentum. Hence, indices may slide towards lower support levels of 18043 - 17627 / 5483 - 5341 levels. The said pattern will be negated on a closing above of the high of the "Spinning Top" formation. As a result markets are likely to move higher to test next target of 18756 - 18945 / 5645 - 5702 levels. Traders are advised to exercise caution in view of the over-bought over-bought position of the RSI oscillator and should trade stop-loss. with strict stop-loss.

Future Outlook
After a consolidation of nearly seven consecutive sessions, finally, indices managed to break out from the "Horizontal Resistance Line" placed at 17908 / 5400 level. Strong momentum was witnessed almost throughout the week as bulls refused to take the foot off the pedal and relentless buying from FII's pushed markets higher. We are now observing a "Spinning Top" pattern on the daily chart. This pattern indicates possibility of some minor consolidation but requires a confirmation in the form of

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Technical Picks | February 18, 2012

Weekly Pivot Levels For Nifty 50 Stocks
SCRIPS
SENSEX NIFTY BANKNIFTY ACC AMBUJACEM AXISBANK BAJAJ-AUTO BHARTIARTL BHEL BPCL CAIRN CIPLA COALINDIA DLF DRREDDY GAIL HCLTECH HDFC HDFCBANK HEROHONDA HINDALCO HINDUNILVR ICICIBANK IDFC INFOSYSTCH ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT M&M MARUTI NTPC ONGC PNB POWERGRID RANBAXY RCOM RELIANCE RELINFRA RPOWER SAIL SBIN SESAGOA SIEMENS STER SUNPHARMA SUZLON TATAMOTORS TATAPOWER TATASTEEL TCS WIPRO R2 18,883 5,763 11,739 1,416 179 1,414 1,901 365 363 649 414 368 354 285 1,674 411 527 746 550 2,341 170 399 1,044 176 3,115 208 705 95 608 1,647 792 1,464 197 297 1,157 118 473 118 881 700 151 120 2,704 288 874 145 577 33 312 131 511 1,272 466 R1 18,586 5,664 11,407 1,391 176 1,346 1,853 357 333 634 400 345 339 270 1,655 396 510 731 539 2,225 161 392 1,013 162 3,032 207 674 90 592 1,547 770 1,393 193 289 1,117 115 461 111 850 659 139 116 2,560 266 848 139 560 31 293 125 494 1,251 457 PIVO PIVOT 18,126 5,507 10,871 1,363 172 1,227 1,785 349 296 610 386 330 329 244 1,632 386 486 712 527 2,094 155 387 966 147 2,894 204 632 83 568 1,432 731 1,304 186 282 1,049 111 447 101 827 612 121 112 2,328 248 814 133 547 29 273 114 480 1,232 445 S1 17,829 5,408 10,539 1,338 169 1,159 1,736 342 266 595 372 308 314 228 1,613 371 469 697 516 1,979 146 380 935 133 2,811 203 601 77 552 1,332 710 1,233 181 274 1,009 108 435 94 796 571 109 108 2,185 227 788 127 530 27 254 108 464 1,211 436 S2 17,369 5,252 10,004 1,309 165 1,041 1,668 333 229 571 358 293 304 203 1,590 361 445 677 504 1,848 140 374 888 118 2,673 201 560 70 529 1,217 671 1,144 175 267 941 103 421 84 773 525 91 104 1,953 209 754 121 517 25 235 96 450 1,192 424

Technical Research Team
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Derivatives Review | February 18, 2012

Buildup in call options suggest further upside much likely
Nifty spot closed at 5564.30 this week, against a close of 5381.60 last week. The Put-Call Ratio increased from 1.41 to 1.70 levels and the annualized Cost of Carry is positive 27.66 The Open Interest of Nifty Futures increased by 4.87 27.66%. 4.87%.

Put-Call Ratio Analysis
PCR-OI has increased substantially from 1.41 to 1.70 levels. This was due to good amount of buildup was visible in at-themoney put option of 5500-5600 strike price and simultaneously we have observed good amount of unwinding in in-the money call option of 5300-5500 strike price and some buildup was seen in 5600 call option in the week gone by.

Implied Volatility Analysis
Implied Volatility (IV) for NIFTY has decreased from 20.43% to 16.20%. Historical volatility (HV) is at 21.23% and that for BANKNIFTY is trading at 34.07%. Liquid counters having very high HV are VOLTAS, LITL, IVRCLINFRA, HDIL and ADANIENT. Stocks where HV are on lower side are ITC, ONGC, DRREDDY, HDFC and TCS.

Open Interest Analysis
Total open interest of market has increased from `1,37,195/crores to `1,51,513/- crores. Stock futures open interest has increased from `33,015/- crores to `36,310/- crores. Some of the big names which added open interest are ONGC, GAIL, NTPC, RCOM and HINDALCO. Open interest was shed in some large caps like SBIN, HDFCBANK, IDFC, TATASTEEL and ICICIBANK.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 25.30 points against the premium of 16.05 points to its spot. Next month future is trading with premium of 60.80 points. Liquid counters where CoC is high are AUROPHARMA, JSWENERGY, CHAMBALFERT, VIPIND and BANKBARODA . Stocks with negative CoC are MCLEODRUSS, DLF, ADANIPORTS, CAIRN and ALOKTEXT.

Derivative Strategy
Scrip : M&M View: Mildly Bullish Buy/Sell BUY SELL
BEP: BEP: `764 Max. Risk: `2000/If M&M closes below `760 on expiry.

CMP : `748.60

Lot Size : 500

Exercise Date (F & O) : 23rd Feb, 2012 Expected Payoff
Price Closing Price (` (`) Expected rofit/Loss Profit/Loss

Strategy: Bull Call Spread Scrip M&M M&M Strike Price 760 780 Series FEB FEB Option Buy/Sell Rate Type (`) CE CE 8.00 4.00

Qty 500 500

725 740 755

(`4.00) (`4.00) (`4.00) `6.00 `16.00 `16.00

Profit: Max. Profit: `8000/If M&M closes on or above `780 on expiry.

770 785

NOTE TE: NOTE : Profit can be booked before expiry if M&M moves in favorable direction.

800

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Weekly

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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