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Technical Picks | February 25, 2012

The bulls take a breather


Sensex (17924) / Nifty (5429)
After an extended weekend, markets opened quietly on Tuesday's session and closed in the positive territory. However, all the remaining sessions were in the favour of the bears. We had stated in our earlier report that the "RSI-Smoothened" oscillator was placed well within the extreme overbought zone. This indicated exhaustion of the rally and indices corrected from their highs to register the first weekly negative closing in 2012. On the sectoral front, Realty, Banking, Capital Goods and Metal sectors contributed heavily in this week's correction, whereas IT and FMCG counters closed with a nominal gain. The Sensex ended with a loss of 2%, whereas Nifty lost 2.43% vis--vis the previous week.
Source: Falcon

Exhibit 1: Sensex weekly chart

Exhibit 2: Sensex daily chart

Pattern Formation
The 200-day SMA and 20-day EMA have now shifted to 5370, 17200 / 5170 and 17720 / 5370 respectively. The "RSI-Smoothened" oscillator and "3 & 8 EMA" on the daily chart have given a negative crossover. The weekly "Stochastic" oscillator is negatively poised. The 61.8% Fibonacci retracement level of the fall 21109 / 6339 (November 5, 2010) to 15135 / 4531 (December 23, 2011) is around 18827 / 5645 5645.
Source: Falcon

5370. 17720 / 5370 The negative impact of above mentioned technical observations will be seen only if indices sustain below 17720 / 5370 level. In this scenario, the possibility of testing 17500 - 17200 / 5300 - 5200 levels cannot be ruled out. Conversely, the immediate resistance is at 18200 / 5522 level. A move beyond this level may push indices higher to test 18293 - 18524 / 5561 - 5630 levels. In the short term, markets have a stiff resistance zone of 18756 - 18524 / 5645 - 5630 levels. If indices manage to cross this resistance zone then they are likely to test important resistance of 18945 / 5702 level. We reiterate that traders should adopt cautious approach and stop-loss. trade with strict stop-loss.

Future Outlook
This week indices corrected after nearing their resistance zone of 18756 / 5645 We are now observing that this resistance 5645. zone almost coincides with the 61.8% Fibonacci Retracement level of the fall from 21109 / 6339 (November 5, 2010) to 15135 / 4531 (December 23, 2011). Further, we are observing a negative placement of "Daily RSI-Smoothened", "3 & 8 daily EMA" and "Weekly Stochastic" oscillators. This indicates possibility of a further correction or consolidation. At present, indices have a decent support zone around its "Daily 20-EMA" level of

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Technical Picks | February 25, 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 18,774 5,712 11,514 1,426 183 1,355 1,872 375 338 708 410 330 338 274 1,686 391 509 749 550 2,250 163 398 1,030 160 3,038 214 678 91 599 1,527 790 1,363 194 313 1,136 119 465 116 874 678 138 119 2,572 270 858 146 568 34 281 128 520 1,328 457 R1 18,349 5,571 11,011 1,347 172 1,269 1,818 359 321 682 396 322 333 250 1,658 383 501 713 537 2,162 156 392 981 150 2,993 212 645 83 575 1,438 760 1,324 189 299 1,051 116 447 105 847 632 129 112 2,389 249 825 132 558 30 273 121 498 1,299 447 PIVO PIVOT 18,099 5,488 10,723 1,301 165 1,223 1,785 346 311 643 387 318 325 238 1,636 377 492 685 526 2,109 150 384 950 144 2,949 209 622 78 561 1,389 739 1,298 185 290 1,006 113 436 99 831 605 123 108 2,292 236 806 122 547 28 268 114 479 1,252 441 S1 17,674 5,347 10,219 1,222 154 1,137 1,731 330 294 617 372 309 320 214 1,608 369 484 649 514 2,021 142 378 900 134 2,904 206 589 70 537 1,300 709 1,259 179 276 920 111 418 87 804 558 113 101 2,109 214 773 109 537 25 260 108 457 1,223 432 S2 17,424 5,264 9,932 1,177 147 1,090 1,698 317 284 579 363 305 313 201 1,586 362 474 621 503 1,969 136 370 869 128 2,860 203 565 65 523 1,251 688 1,233 175 267 876 107 407 81 788 531 107 97 2,012 202 754 99 527 23 255 101 438 1,176 426

Technical Research Team


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Derivatives Review | February 25, 2012

5200-5300 is very strong support zone for March series


Nifty spot closed at 5429.30 this week, against a close of 5564.30 last week. The Put-Call Ratio decreased from 1.70 to 1.33 levels and the annualized Cost of Carry is positive 11.85 The Open Interest of Nifty Futures decreased by 10.71 11.85%. 10.71%.

Put-Call Ratio Analysis


PCR-OI has declined to 1.33 from 1.70 as its beginning of new expiry. In march series we are witnessing heightened activity in 5200 and 5300 zone which we believe is strong support zone for the market. Call activity is very scattered and strikes as far as 6000 option is also active for Nifty. However 5500 and 5700 strike calls have maximum open interest as of now.

Implied Volatility Analysis


Implied Volatility (IV) for NIFTY has increased from 16.20% to 23.50%. Historical volatility (HV) is at 21.20% and that for BANKNIFTY is trading at 35.32%. Liquid counters having very high HV are LITL, VOLTAS, HDIL, ADANIPOWER and UNITECH. Stocks where HV are on lower side are ITC, DRREDDY, COREEDUTEC, SUNPHARMA and TCS.

Open Interest Analysis


Total open interest of market has decreased from `1,51,513/crores to `1,03,536/- crores. Stock futures open interest has decreased from `36,310/- crores to `30,678/- crores. Some of the liquid counters which added open interest are OFSS, STER, ESSAROIL, GSPL and DISHTV. Open interest was shed in some large cap names like AXISBANK, SBIN, LICHSGFIN, BHEL and MARUTI.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 58.15 points against the premium of 46.00 points to its spot. Next month future is trading with premium of 90.45 points. Liquid counters where CoC is high are ALOKTEXT, COREEDUTEC, INDUSINDBK, ABGSHIP and NHPC. Stocks with negative CoC are SUZLON, COALINDIA, ABAN, ESCORTS and PUNJLLOYD.

Derivative Strategy
Scrip : NIFTY View: Mildly Bullish Buy/Sell BUY SELL
BEP: BEP: 5800

CMP : 5429.30

Lot Size : 50

Exercise Date (F & O) : 29th March, 2012 Expected Payoff


Price Closing Price (` (`) Expected rofit/Loss Profit/Loss

Strategy: Ratio Bull Call Spread Scrip NIFTY NIFTY Strike Price 5400 5600 Series MAR MAR Option Buy/Sell Rate Type (`) CE CE 200.00 100.00

Qty 50 100

5275 5400 5525

0 0 `125.00 `150.00 `25.00 (`100.00)

Max. Risk: Unlimited


If NIFTY continue to move above BEP .

Profit: Max. Profit: `10,000/If NIFTY closes at 5600 on expiry

5650 5775 5900

NOTE TE: NOTE : Profit can be booked before expiry if NIFTY moves in the favorable direction and time value decays.

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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%)

Weekly

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