Wednesday, August 11, 2010

Update on The Ultimate Momentum Signal - 11th Aug. 2010

Another Failed Test of the Highs ... ???

The Nifty futures opened lower at 5462 on Tuesday and traded above the open for almost two hours. The futures again tried to test the previous day's highs, but it could not even reach the previous day's close. It recorded a high of 5475 and  traded lower to reach 5440. The close was at 5462. 

Most readers of this blog might have known gaps in the charts. The normal gaps occur when the trading ranges of two bars do not have common areas. However, this blog would like to introduce another kind of subtle gap which normally isn't noted by the chartists. This subtle gap occurs when a bar do not touches the previous closing price or the last traded price. This kind of gaps are common in case of stocks but are not so common in case of indices like Nifty and it's derivative, Nifty futures. Sometimes, these subtle gaps may indicate a reversal of the trend too. 

Now readers may ask what is the bottom line here. Well, a subtle gap occurred in the Nifty futures chart on Tuesday.  The Nifty futures did not touch the Monday's last traded price of 5478.50 on Tuesday,  leaving very small gap of 3 points. Now the natural question is whether this is significant or not ! May be yes or may be not !! The future will tell us. But, the fact of the matter is that we have one more tool  for our analysis.
Nifty Futures  - Daily Chart
Tuesday's trading has lead to the formation of a doji candle in the chart indicating indecision. 

World Markets

Commodities and commodity stocks weakened on Tuesday on account of data pointing to slowing demand in China. The European market indices, the FTSE, CAC and DAX closed with losses of 0.63, 1.24 and 1.03 percents on Tuesday. The US markets too opened in the negative territory with triple digit losses in the Dow Jones index, in front of the imminent Fed's FOMC statement. The tech heavy Nasdaq index lost more on account of a prominent investment bank's downgrading of Intel stock to neutral.

Meanwhile the Federal Reserve statement said that the recovery is slowing and again pledged the lower  interest interest rates for an extended period. The Fed also announced it's intention to roll over it's holdings of Government bonds on maturity which lead a rally in the stock and bond markets.The US stock indices were trading with minor losses of 0.15 to 0.80 percents at 00.15 Hrs IST after paring the earlier losses.   

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on   10th August, 2010 is given below :
The Nifty future and the indices, Nifty and Sensex, have closed in the positive momentum territory as on Tuesday.
Projected Momentum Signal Close Values

The projected levels Momentum Signal values applicable to various ranges of closing values of the Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on  11th August, 2010, are given in the following table.
Please click on the table to enlarge. For more info on the above table,  please click here.   

The following quotes are from the previous posts and are being repeated here as matter of caution :

"Readers of this blog may please note the following  'Risk Factor' which is being  repeated almost daily these days. The markets are trading in small ranges at the top end of a slow climb and for all practical purposes the trading is range bound. Range bound markets are not suitable for the  profitable trading of the Momentum Signal system."
"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."

Cheers and Prosperous Investing and Trading !!!

To access and/or download  the free online Position Limit Calculator click here.

To checkout the five year history of The Momentum Signal Spreadsheet click here
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