Wednesday, September 29, 2010

Update on The Ultimate Momentum Signal - 29th Sept. 2010

Another Test of the Highs ... ?

Nifty futures were expected to open flat and trade in a directionless manner as stated in the previous post.  It opened flat at 6050 and traded sideways in the morning session. However, by the time the European markets opened with losses nearing a percent each, Nifty futures too sold off to reach a low of 6003. Nifty futures recovered from these lows slowly but the recovery turned in to an intra day short covering rally. The rally almost reached the highs of the day at 6064. The futures closed for the day at 6055. Tuesday's lows of the Nifty Futures and the underlying Nifty index coincided with their 5 Day Exponential Moving Averages ( EMA ).   The support seen at the 6000 level and the momentum of the intra day covering rally, which again trapped the sellers, may help Nifty futures to test the rally highs once again on Wednesday.

 Nifty Futures - Daily Chart   

Tuesday's candle has it's long tail on the downside indicating buying or support at the lower parts of the day's trading range. The combined  open interest of the two near month contracts of Nifty saw an addition of 5.97 lakhs ( 0.597 million ) as on Tuesday.  The near month ( Sept ) 6200 put open interest also saw  significant  addition  of 8.31 lakhs ( 0.831 million ) as on Tuesday. These two facts may indicate some upside for the Nifty futures before the expiry on Thursday.

Nifty Valuations : The trailing PE multiple of Nifty index is still quoting above the 25 mark. The historical price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index  were at 25.45, 3.82 and 1.03 as on 28th September 2010. 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. )  The following table shows the latest data related  to Nifty historical valuations as seen from the NSE, India website.   

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  28th September, 2010 is given below :
Nifty futures and the tracked indices have closed with the upward Momentum Signal values of +80 for the fourth day in succession.

Projected Momentum Signal Close Values
The projected levels Momentum Signal values applicable to various ranges of closing values of the current month Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on   29th 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.

As seen from the above table, any further correction or consolidation may lead to the Momentum Signal trading system indicating an exit of the existing long positions taken at the 5576 levels. 

The trading stop for long positions under the Ultimate Momentum Signal system  stands raised to 5965 ( i.e. 6093 minus 2.1 % of 6093 ). Traders may raise the trading stop to 97.9 % of the new high, as and when the market makes such new highs.
Cheers and Prosperous Investing and Trading !!!

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