google.com, pub-7808368332557457, DIRECT, f08c47fec0942fa0 The Ultimate Momentum Signal: Update on The Ultimate Momentum Signal - 18th Nov. 2010

Thursday, November 18, 2010

Update on The Ultimate Momentum Signal - 18th Nov. 2010

Nifty Futures Approaching Support at 5940 - 5950 !!!

The last post was titled ' The Rebound is On !' expecting a small rally and at least, a test of the next resistances at 6175 because of the sharp fall happened in the Nifty Futures in a short  time of just two days. Even though the rebound started a bit earlier than expected, it's demise was also equally early.  

Last Tuesday, Nifty futures opened flat at 6128 and almost immediately sold off by around 30 points to record an intraday  low of  6100. Since the Nifty future was still in the recovery mode, this sell off was bought by traders initially. However, the rally from the 6100 area only barely touched  the previous day's last traded price at 6134.

Nifty Futures - Intraday Line Chart 

Original Picture Source : NSE India 


Nifty futures stalled at this area and never reached the adjusted previous close at 6140.  The intraday  line chart of  Nifty futures and Nifty index given above shows the trading period of around one and a half hours.  The chart clearly shows the Nifty future's failure to reach the previous close at 6140. Later on,  within the first one and a half hour mark itself, market started to fall slowly from these levels. Once the 6100 level was broken at around 11.15 AM, Nifty futures went for an almost  vertical free fall and reached  the 6000 mark within a short period of half an hour.  All recoveries from these levels were unable to pass the 6030 mark. Nifty futures recorded a low of 5975 in the afternoon and the final trade was at 5994. 

Nifty Future - Daily Chart  


The daily chart of the Nifty future shows the next support at the 5940 - 5950 area. Since the futures contract had reversed from these levels at least three times in the past, these support can act as a crucial trend deciding  point. As such traders may expect another rebound from this area. However, a word of caution too. It is always better to wait and enter in to trades for a bounce, only after the market action confirms a rebound. Otherwise, it might turnout to be trying to catch a falling knife.

European and US markets made comparable losses on Tuesday. The Chinese and Hongkong markets extended their losses on Wednesday too. The European markets closed with minor gains on Wednesday. The US markets were trading with minor gains at the time of this post. Therefore, barring any unforeseen circumstances, Asian markets may trade positively on Thursday morning thereby increasing the chances of a minor pull back on Thursday as described in the previous paragraph.

 Nifty Fundas     

The present sell off  has lead to fall of the trailing PE of the Nifty index below the 24 mark as on Tuesday. The table below shows the latest data related  to the Nifty trailing valuation, sourced from the NSE, India website.


The historical  trailing price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index  were at 23.86,  3.77 and  1.04 as on  16th  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 ).



Updated Momentum Signal Spreadsheet

he updated spreadsheet showing the Momentum Signal as at the close of the trading on  16th  November, 2010 is given below :
The Momentum Signal values of the Nifty Future, Nifty Index and BSE Sensex were at -100 as on  Tuesday'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  18th 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.

The trailing trading stop against the short positions in the Nifty future may be fixed by adding 2.1 % of the low,  ( present low - 5975 ) with the low. ( ie. 5975 + 2.1 % of 5975 = 6100. )

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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To checkout the five year history of The Momentum Signal Spreadsheet click here


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