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Monday, August 30, 2010

Update on The Ultimate Momentum Signal - 31st Aug. 2010

 Nifty Futures Between the 50 and 20 DMAs ... !!!

On Monday, the first day of the current trading week, the Nifty futures opened higher with a bang on the back of the late Friday's rally in the Wall street. As expected, the futures tested the first level of resistance at the 5460 level. The futures  traded above the 5460 level for a very short time at the opening. However, it could not sustain the gains and the correction set in right away. After hovering flat for some time below the 5445 levels it hit a low of 5391 by 2.30 PM, which was even below the previous day's lows. However, as the Nifty and Sensex did not break below the previous lows, the futures too recovered trapping the sellers who sold below the previous day's lows. The news about the retention of 0 %  long term capital gains tax status of equities in the new direct taxes code also helped the relief cum covering rally in the last hour of trading. The Nifty futures closed at 5429 with a premium of  12 points above the Nifty index.

Nifty Futures - Daily Chart


The five trading days old correction has brought the futures between the 50 and 20 DMAs. Monday's trading has not changed the technical position of the market.  If the international markets are giving out positive cues on Tuesday, the futures may again try to test the 5460 - 5465 resistance. However, it seems that  the chances of  a continuation of the downtrend is increasing day by day by the action of the market getting bought at every fall. ( Normally, if  a strong market goes for  a free fall, it rebounds even stronger trapping the bears and this condition seems to be absent now as we had three down days and two up days in the past five days. )  Another rally from the support of 50 DMA level  can not be ruled out yet.

The lower panel of the above chart shows the various daily moving averages ( DMAs ) of   the Nifty futures.  The 20, 50,100 and 200 DMAs of the futures are placed at 5461, 5397, 5266 and 5176 respectively as on 30th August 2010. The futures may get supports at these various DMAs and other previous lows in case of  a mild correction. 


Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  30th August, 2010 is given below : 


Because of the significant premium seen in the quotes of the Nifty future, the future has closed with a  Momentum Signal value of -50, whereas the index closed with a value of -100  on Monday.

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   31st 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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To checkout the five year history of The Momentum Signal Spreadsheet click here
 
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1 comment:

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