Wednesday, September 22, 2010

Update on The Ultimate Momentum Signal - 23rd Sept. 2010

   Profit Booking to Continue ... ?

Yesterday's post was titled "   Signs of profit Booking ... ? " because of the negative advance decline ratio and the liquidation seen in the current month Nifty futures on Tuesday. And as expected, the profit booking ensued in Wednesday's trading. Nifty futures opened in the green on Wednesday as is common in strong bull markets. It recorded the day's high of 6048 in the very opening of trade too. However, after hovering in the top end of the previous day's trading range for less than an hour, the profit booking started. The market sold of almost 100 points and the futures recorded a low of 5953. This low also coincided with the support of the narrow regression channel as shown in the previous day's post as well as the previous rally target of 5950 to 5960 area according to the the gap theory. Nifty futures recovered from this minor support area and even staged a rally of 50- 60 points. The futures finally closed at 5993.

Wednesday's trading showed very high volume as well as further liquidation of positions in the Nifty futures. The net reduction in the open interest after accounting for the shifting of positions to the October series in the two front months amounted to 14.26 lakhs ( 1.426 million ). This figure is even higher than the previous day's net reduction in the open interest figures. The advance decline ratio also recorded a much more negative figure on Wednesday. These facts may indicate the continuation of the profit booking leg for some more time. Moreover, the minor support from the narrow regression channel has gone up steeply to the 6000 level for Thursday's trading.  As already stated in the previous post, any close outside the narrow regression channel may confirm the consolidation or pause stage of the rally.

Nifty Futures - Daily Chart

The trading stop for the long positions under the Ultimate Momentum Signal trading system remains at 5920 which is 2.1 % below the rally high of 6048.

The historical price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index reached 25.29, 3.86 and 1.02 as on 22nd September 2010. The following table  shows  the latest  Nifty historical fundamental valuations data from the NSE, India website. Readers may please note that the periods in which the Nifty index traded above a historical PE Ratio 25 are very limited and both such periods were the blow out stages of earlier bull markets. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page of this blog. ) 

Nifty Index - PE, PB and DY Ratios

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  22nd  September, 2010 is given below : 
Nifty futures and the tracked indices have closed with the maximum upward Momentum Signal values of +100 for the twelfth consecutive trading day.

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   23rd September, 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 trading stop for long positions under the Ultimate Momentum Signal system  stands raised to    5920 ( i.e. 6048 minus 2.1 % of 6048 ). Traders may raise the trading stop to 97.9 % of the new high, as and when the market makes such new highs.
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