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Thursday, May 20, 2010

Update on The Ultimate Momentum Signal - 20th May, 2010

  The Breakdown At Last, But What is Next ... !

The Nifty futures opened lower at 5006 due to the overnight negative cues originating from the US markets  and traded flat in the initial hours. It also tried to trade higher, but could only reach the low of the previous day's range at 5019. As it could not sustain the higher reaches, it traded lower in tandem with the European markets. It even broke the 200 DMA at 5085 and traded to a low of  4901. The fututres closed at 4925 for the day. The futures have some support at the 4900 - 4910 area from the 50 week moving average at 4910. This was also pointed out in the post dated 18th May, 2010. The next support for the futures are at the 4675 - 4700 levels which are the February 2010 lows.

It was on the third attempt that the futures broke the 200 DMA zone. The earlier two attempts were made on 7th  and 17th of May respectively. Readers might be wondering why this is mentioned here  at all ! There is a reason ! Experience has shown that the third attempt to test a significant resistance or support has a higher probability of succeeding.  Well there is no proof for this ! But this is an observation which may be useful.

S&P Nifty Index - Daily Chart 


Instead of the customary Nifty futures chart, today's chart is of the index. But all levels marked are applicable to the futures. As the futures have broken the 200 DMA and closed below it, now let us check what could be the next course. When a market undergoes a breakout or breakdown, sometimes, the significant level which has just been passed is retested. This retest could be either immediate or be a bit late. In case of retest, traders may watch for the 4985 level which is the 200 DMA as well as the low of the first test. 

World Markets

The German short selling ban, which was also reported  in the last post, affected the European markets negatively and the FTSE, DAX and the CAC closed with losses of 2.5, 2.6 and 2.9 percents respectively on Wednesday. The US market indices were trading with losses of a percent each at the time of this post ( 00 Hours IST ). Earlier in the day the US S&P 500 index had bounced from it's 200 DMA at  1101. The VIX index was trading at 35 increasing 5 % from the previous day.

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  19th May 2010, is given below.


The Momentum Signal has returned -100 values for the third day in succession.

Projected Momentum Signal Close Values

The projected levels of closing values corresponding to the momentum shift / neutrality / continuation as on the close of trading on 20th May, 2010 are given in the table below. The table also include the projected closing values of BSE Sensex corresponding to the momentum shift / neutrality / continuation signals.

   Please click on the table to enlarge. For more info on the above table,  please click here.
   
The neutral areas are placed just above the 200 DMA levels. The positive trigger values have increased too.

The trailing stop is placed at the 5004 level ( Low 4901 + 2.1 % ).
Please do write in your suggestions and comments about this blog.

Cheers and Prosperous Investing and Trading!!!

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