Thursday, May 6, 2010

Update on The Ultimate Momentum Signal - 7th May, 2010

 The Judgment Day Is Here... ! 
( Ambani Vs Ambani )

The Final judgment on the RIL- RNRL gas dispute is expected to be pronounced by the Supreme Court on Friday, the 7th of May, 2010. All traders may remember that the Mumbai High Court had favored the Anil Ambani managed RNRL earlier. In expectation of an adverse judgment, the Reliance stock has not been  performing for some time and is presently in the correction mode. As the Reliance stock has the maximum weight in the Nifty index, it has the power to move the market single - handedly.  A five percent move in either way may be expected in the Reliance stock in accordance with the judgment. The RNRL stock may see volatility which may be as high as 20 to 40 %. Other Anil Ambani group stocks like  RPOWER and RELINFRA may also see higher volatility.

Reliance - Daily Price & Moving Averages Chart

Depending on the judgment, the Relaince stock may reach 950 - 960 range on the lower side and 1050 - 1060 range on the upper side. The previous low of Reliance is at 960. The 50 and 100 DMAs of the stock are placed at 1052 - 1053 levels.  The 20 DMA is at 1064. 

Daily Update on The Signal

The Nifty futures opened with negative bias on Thursday and traded lower to reach a new low of 5025 when the European markets opened with significant losses. However, the futures recovered and tested the then day's high. It recorded a new high for the day at  5114 and finally closed at 5094. Friday's trading will be based on the outcome of the Reliance verdict and the cues offered by the international markets. A verdict in favor of the Reliance may infuse a short covering rally in the Nifty Futures too. Another sell off in Reliance stock and the Nifty futures may see that the  Nifty futures touching the 200 DMA at 4950. The trailing stops are at 5130 and 5150 levels at present. Please see the chart below and the previous post for more information. 

Nifty Futures - Daily Chart     

World Markets

The European markets closed with significant losses of 1.5 to 2.5 % on Thursday. The international investors were slightly disappointed with the statement by the European Central Bank. The statement had no policy initiatives to tackle the sovereign debt problem. The Euro has weakened significantly against the USD.  US markets were trading with losses of 1 to 1.5 %  at the time of writing this post.
The  US S&P 500 index was trading at the January, 2010 high of 1150 at 10.45 PM IST.

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  6th May 2010, is given below.

The Momentum Signal has closed in the sell territory for the seventh day. 

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 7th 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.

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

The closing values for the continuation of the downtrend have decreased for the -50 signal whereas the closing values required for the -100 signal has  increased. The values required for the resumption of an uptrend is far away at present.
Traders may expect a highly volatile day of trading on Friday. Having no positions just before the delivery of market moving news items is also a good policy which  reduces undue risk to the trading capital. 

Please do write in your suggestions and comments about this blog.

Cheers and Prosperous Investing and Trading!!!   

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