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Tuesday, November 30, 2010

Update for 30th November 2010

  Nifty Futures Face Resistance at 5865 !

In the update for 29th November, we had stated that in the absence of any fresh negative news and the if the Ireland bailout announcement is made as expected, these factors may pave the way for another retest of the 5860 level by the Nifty futures. It was also stated that in case of any fresh break out of adverse news, especially about any market manipulation with the bank borrowings, the downtrend continue for the time being. By Monday morning, there were not much new negative news and the Asian markets were trading mostly flat to positive. The SGX Nifty contracts were indicating a positive open too. As such, the Nifty futures opened some 28 points higher from the last traded price at 5800. This open was at the midpoint of the previously indicated reference levels of 5820 and 5775. The futures immediately traded to the 5820 area and from there, it tried to test the previous day's last traded price as well as the lower reference level of 5775. 

Nifty Futures - Intra-day Chart   



This test of supports ended at 5788 without reaching the lower reference points, thus paving the way for a test of the then day's  high. The recoveries from the 5790 area were sold off twice from the 5832 area. However, due to the positive vibes in the market, these corrections were bought for the day and thus Nifty futures tried to test the 5860 area. After reaching the 5860 resistance, Nifty futures stayed above the 5840 level for significant time in the intra-day context and tried to break above the resistance at least three more times. However, some selling was observed  at around the 5860 - 5865 levels at each of these tries. Nifty futures closed at 5848 for the day. 

Nifty Futures - Daily Chart 


Nifty futures recorded almost the same high of 5866 in the last two trading days. As such, this resistance has earned higher significance from the last two day's market action.  Therefore,  the Nifty future may now try to test the lower end of the trading range before trying to break above the resistance. It has lower support at the 5750 to 5775 levels enhanced by the presence of the 100 day moving average at the 5775 . However, a resumption of the down trend and even a break of the Friday's panic low can not be ruled out at present.

European markets  were trading with some minor gains when the Indian market closed for the day. However,  even after the announcement of the Ireland bailout plan, European stock indices corrected on the back of increasing yields ( decreasing bond values ) of  the PIIGS ( Portugal, Ireland, Italy, Greece and Spain ) sovereign bonds. US markets were also trading with losses of a percent at time of this post. These overnight losses in the western markets may lead the Indian markets to a test of the lower supports as envisaged in the previous paragraph.

As the  technical position of the market has not changed much on Monday by the formation of an inside day candle in the Nifty future chart, day traders may use the previously indicated reference levels ( slightly modified now ) of  5650, 5725, 5775, 5825, 5865 and 5940 for Tuesday's trading too. ( Please read the update for 29th Nov. for more details. )  

Nifty Option  Scene  

The Put Call Ratio( PCR ) of December series Nifty options remained unchanged at 1.28 times as on  Monday. Significant additions of  Dec. Put open interest were seen at  5800 and at the strikes below. Similarly, significant additions to Dec. Call open interest were seen starting upwards from the 5800 strike onwards. The additions in the option open interest appeared to be the buying and selling of strangles. 
 
Nifty Trailing Fundamentals        
 
 
 
The trailing PE of Nifty index has gone up above the 23 mark as on Monday. Even though the market  has corrected some of the over valuation, even this level of trailing valuation is at the top end of the historical valuations of the Index.  The historical  trailing price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index  were at 23.26,  3.67 and  1.07 as on  29th  November 2010. Readers may please note that the periods in which the Nifty index traded above a historical PE Ratio of 25 were limited to just  two occasions in the years 2000 and 2007-08. And both such periods coincided with the highs just before the burst of the then bull markets. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page of this blog ).

Latest Ultimate Momentum Signal


The updated Momentum Signal spreadsheet showing the latest signal values of the current month Nifty future and the Nifty index is given below :



The Momentum Signal values of the Nifty Future, Nifty Index and BSE Sensex were at -100 as on Monday's close. 

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  30th November, 2010, are given in the following table. All readers are requested to take note that the table below is just a ready reckoner for the next day's Momentum Signal values and are in no way any targets for the Nifty futures or indices shown therein.  
 
 
Please click on the table to enlarge. For more info on the above table,  please click here.

All readers are requested to read the Risk Factors, Risk Analysis, Position Limits and FAQs pages of this blog to have a reasonable understanding of the system. Please do post your suggestions and comments on how this blog can be made more useful.
 
Cheers and Prosperous Investing and Trading !!!

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2 comments:

Anonymous said...

thanks amigo! great post!

Anonymous said...

This was a nice article to read, thank you for sharing it.