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Sunday, March 21, 2010

Update on The Ultimate Momentum Signal - 22 - 03 - 2010

The Breakout - Day 14
The Old Lady on the Mint Street Punches....!

Heard on the web:
"Everyone has a plan 'til they get punched in the mouth."
Now it's a question of who punched whom..! 
The Old Lady on the Mint Street is an old and forgotten name for RBI.  Last Friday, the RBI  announced quarter percent hikes in the REPO and reverse REPO rates after the markets were
closed .

Now it's the question of who got punched...!

Here's a picture which says it all...!

                               Picture Source - http://www.google.com/finance


The Nifty future is poised to open lower on Monday because of the rate hikes.  Stocks from the interest sensitive sectors of banking, real estate and automobiles will take the maximum impact. Even though a rate hike was being anticipated for some time, the timing was unexpected. ( The quantum of the raise makes one wonder about the possibilities of  another hike in the 20th April monetary policy). Please also remember about the last post in which this blog had commented about a possible over valuation of the market.
This is the kind of event risks the position traders could not avoid. Hence, it's the time to just follow the rules of the trading system and not to get disoriented by the punch. 

The stop loss now stands raised to 5170 (  i.e. 5282 - 2.1 % of 5282 ). Here is a weekly chart of the futures  showing the current uptrend. 

Nifty Future - Weekly Chart


Nifty Future - Daily Chart ( Moving Averages )


In case of a correction in the market, the future may get support  at the range of 5020 to 5060, where the 100, 50 and 20 day moving averages are converging.


The Updated Momentum Signal Spreadsheet 

The updated spreadsheet showing the Momentum Signal as on the close of   19th March 2010, is given below.
 Projected Momentum Signal Close Values

The projected levels of closing values required for momentum shift / neutrality / continuation as on the close  of trading  on 22nd March 2010 are given in the table below. The table also include the projected closing values of BSE Sensex required for momentum shift / neutrality / continuation.

  You can click on the table to enlarge. For more info on the above table,  please click here.

Even though the trading system rules recommends a trailing stop loss of 2.5 % from the maximum favorable excursion, it was reduced to 2.1 % three days back, due to the long nature of the uptrend and the significant non - participation by some of the Nifty constituents in the current rally.  The  new stop loss point is at 5170.




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