Tuesday, August 24, 2010

Update on The Ultimate Momentum Signal - 25th Aug. 2010

  The 5550 Resistance Still Stands Tall ... !!!

The Nifty futures opened at 5540 on Tuesday. The important resistance point of 5550 stood tall for the fourth successive trading day on Tuesday. Therefore, as envisaged in many previous posts on this blog, the Nifty futures tested the new support at the area between 4475 and 4490. It hit a day's low of 5480 within the support area and recovered from there to close at 5508 for the day. Tuesday's market action  seems to have  averted the scenario of a breakout above 5550 and the resultant  irrational exuberance and euphoria as described in the post dated 23rd August, 2010, at least for the time being.   The domestic institutions seem to have sold heavily on Tuesday's trading session. Meanwhile, the current month future has gone in to a premium against the discount seen in the recent past which indicates either buying or short covering at the end of the day.  

Nifty Futures - Daily Chart  

The international markets are still in a correction mode at present. The appearance of two star candles  followed by a break just below an important resistance can be termed as a bearish  pattern. However, one  day long correction will not usually signal the end of  a long rally. Hence, a retest of the recent highs and even a breakout above the resistance can not be ruled out completely. The Nifty future has support at  5450, 5350 and 5225 levels at present. Any close below 5450 is the minimum requirement for signaling a correction. The start of an intermediate downtrend is to be confirmed  by the formation of  lower highs and lower lows in the chart. 

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on   24th August, 2010 is given below : 

The Momentum Signal values remained at +100 and +80 for the Nifty future and the Nifty index as per the last traded prices 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  25th 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.  

As matter of abundant caution, it is reiterated that the market may still be range bound by all effects and therefore, the risks of the system indicating whipsaw signals are extremely high if the markets remain range bound.

"Readers of this blog may please note the following  'Risk Factor' which is being  repeated almost daily these days. The markets may be trading in small ranges at the top end of a slow climb and for all practical purposes the trading may remain 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 !!!

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