Sunday, July 11, 2010

Update on The Ultimate Momentum Signal - 12th July, 2010

 Another Day of Gains and A Buy Signal ... !!!

Even though the Nifty futures closed near the low of day on Thursday,  due to the positive cues offered by the international markets overnight, the markets opened positively on last Friday. As expected the Nifty futures rallied to test the resistance band of 5360 to 5400. The futures traded to high of 5367 and closed at 5353 for the week. The Momentum Signal has indicated a buy as on the close of Friday's trading. The buy signal has happened just below the resistance band which consists of a double top and the 52 week high. From the current trading week onwards, the market action will also depend on the results of the index heavy weights. Infosys which is trading at the 52 week high, kicks off the result season on Tuesday. However, the elephant in the room, the Reliance stock has weakened last week, raising some concerns to the bulls. 
Nifty Futures - Daily Chart

If the market is unable to break out immediately, it may  try it later after a pause including two or three day's sideways trading. The downward slanting previous resistance line may act as the new support line in case  the above scenario being played out.

The Big Picture - S&P Nifty Weekly Chart

Let's also check the big picture  by taking a look at the weekly chart of the Nifty index. As is seen in the above chart, the market has been trading inside an upward moving channel for almost eight months now. The index has recorded higher lows and higher highs during this period. In case of a breakout of the existing previous high, the headroom for the market may be limited by the resistance offered by the line joining the tops of the channel. The top end of the channel is placed at the 5500 to 5550 levels at present.

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  9th July 2010, is given below.
As already stated, the Momentum Signal has closed with a value of +50 indicating long positions.

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 12th July, 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 closing values required for a momentum Signal value of +100 has also decreased and are below the closing values of last Friday. Barring any unexpected earnings disasters, the market may trade with flat to positive momentum in the short term.

As the Momentum Signal is primarily a trend following system, flat and range bound markets may force the system to indicate false signals ( whipsaws ).  The system does not consider any resistances too. All readers of this blog are requested to read and understand all the intricacies of trading the Momentum Signal System and it's risk factors. Please do write in your comments and suggestions. 

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