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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