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Monday, July 19, 2010

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


   Another Close in the Trading Range, But What Next ... ?

In spite of the last Friday's losses in the US markets , the Asian markets were trading without heavy losses on Monday. The Nifty futures, therefore, opened at the lower end of the last Friday's trading range. Once the futures traded inside the range for a reasonable time, it even tested the highs of the range as envisaged in the last post. However, it lost the positive momentum again and closed inside the prevailing trading range for the fifth time in six trading days. It seems that the market has spent enough time at this crucial area of  the previous resistance turned support cum trading range. Traders may look out for decisive moves out of the present  trading range in the next few trading days. However a word of caution too ... !  Some of these kinds of moves are susceptible to failures leading to bull / bear traps too ... !

Nifty Futures - Daily Chart  

   

 World Markets

The European stock indices closed in the negative territory on Monday. The markets in Europe opened with losses and traded in the positive territory for most of the trading day. However, the FTSE, CAC and DAX surrendered their gains in the last hour of trading and closed with losses of 0.20, 0.40 and 0.52 percents respectively. The US markets were trading flat at 11.30 PM IST on the back of waning confidence levels of the home builders.       

Updated Momentum Signal Spreadsheet

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



Even though the Momentum Signal has returned a lesser positive value, it has remained in the positive territory for the seventh trading day. As the market has not moved much in the last seven days, "....the chances of the system exiting the present long position either by the activation of the trailing stop or by the indication of neutral  momentum are increasing. " The BSE Sensex has returned a neutral momentum value as on Monday itself due to the weakness in the Reliance stock.

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 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.
 
 
The closing values required for the continuation of the existing long position as on Tuesday have moved upwards and are above the trading range of Monday. The closing values corresponding to a trigger  of the sell signal have also risen. 

As the Momentum Signal is primarily a trend following system, it may indicate whipsaw signals in range bound markets. As such, all readers of this blog are requested to read the various pages describing the system and understand all the intricacies of trading the Momentum Signal and it's risk factors too. Please do write in your comments and suggestions.



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