Friday, December 31, 2010

New Year Greetings !

Wishes All 
A Very Happy And
Prosperous New Year ! 

Update for 31st December 2010

  Derivative Expiry Over, But What Now ?

Profit of 140 Points in the Last Trade : This author is happy to announce that, on expiry of the December series Nifty futures contracts, the last buy signal indicated by the Momentum Signal Nifty trading system has made a profit of 140 points. For non-regular readers of this blog, here is a retake. The last buy signal in the Nifty futures was indicated by the Momentum Signal trading system on 16th December, 2010 at the 5960 level. Since the contract expired at 6103, the long position has made a profit of 140 points in the December series Nifty futures. Now, here are the best things about the trading system. It comes free. It does not require any  registration or payments. Just check the updates to find when the momentum shifts and follow the trade management rules availble on the site. The Momentum Signal values applicable to various closing values / ranges of Nifty futures, S&P Nifty and BSE Sensex are also made available one day before the trade date.  

Nifty futures opened flat on Thursday and immediately went in to the positive territory. However, as is usual in these low volume low volatility markets, the gains were limited. The contract kept on trading below the  6090 reference level for most of the morning session. Unable to break above the 6090 level, Nifty futures also tried to test the supports, in the middle of the morning session. However, it recovered from the adjusted close of the previous day. In the last half an hour of trading, Nifty futures broke above the 6090 level  and closed at 6103.

     Nifty Futures - Intra-day Chart  


Thursday, December 30, 2010

Update for 30th December 2010

  At Last, A Close Above 50 DMA !

After spending a lot of time in a tight trading range between 5965 and 6065 for the past six trading days, at last, Nifty futures rallied on Wednesday. For the first time since the 16th of November 2010, Nifty futures have closed above the 50 day moving average ( 50 DMA ) as on Wednesday. Wednesday's market action seemed to be decisive, even though the rally still lacked good volumes. Even though the advancing stocks in the underlying index outnumbered the declining issues, the gains were mostly achieved by a handful of select blue chip constituents of the index. Nifty futures opened flat in the morning and immediately went on to test the reference level of 6030 - 6035. It spent some time trading around these levels. Once the futures broke above this level, a slow rally ensued till the swing high of 6065. In the dying minutes of the trading day, Nifty futures broke above this minor resistance and closed at 6074.50 which incidentally became the day's high.

    Nifty Futures - Intra-day Chart   

Wednesday, December 29, 2010

Update for 29th December 2010

   More Sideways Trading or What Now ? 

Some Random Comments - It seems that some random market commentary is in order, as the market has not been doing anything  interesting at all now a days. Most markets become moribund at this of the year because of the holiday season and the reluctance of fund managers to trade in the low volume  holiday markets. Therefore, Indian markets are also undergoing this seasonal trading pattern at present. However, the strange thing about the present day market is the weakness or the lack of participation of a whole lot of index stocks from as many sectors to participate in the current rally or upswing which started from the 5750 levels on 10th December, 2010. By the end of Tuesday's trading, it seemed that only stocks from the IT and Pharma sectors were upholding the index at these levels. Another broad sector, the commodities sector, which exhibited some strength recently,  too seemed to be loosing the strength. Now the question is - which is the sector or stocks capable of rallying further from here ? A cursory glance at the charts of most index stocks do not present much hope for a rally in the new year, unless the FIIs come in droves to buy in to the markets again !

    Nifty Futures - Intra-day Chart     


Nifty futures traded between the reference levels of 6000 and 6030 for the whole trading day. There is nothing more to write home about Tuesday's trading.

Tuesday, December 28, 2010

Update for 28th December 2010

 Some More Sideways Trading or a Test of Supports ?

Nifty futures opened flat on Monday and almost immediately in the opening session, it started to trade above the previous day's high as well as the swing high of 6043. As the up move could not be sustained at the higher levels of 6060, especially because of  some weakness seen in the commodity stocks, Nifty futures slowly traded lower and breached  the 6030 reference level in the afternoon session. The day's low was at 6005 and the close was at 6007. The intra-day chart of Nifty futures shows the low volume holiday trading of Monday. As the markets are still finding it tough to rise above the 6100 levels, we can expect some more sideways trading at the best, before the expiry. An alternative scenario could be a test of the 5940 area and to take it from there in accordance to the then behavior of the market.    

   Nifty Futures - Intra-day Chart       

Nifty Futures  - Daily Chart    

Sunday, December 26, 2010

Update for 27th December 2010

   Nifty future Closes at the Swing High, Now What ?

In the last posts of the previous week, this author had indicated that Nifty futures may trade sideways in the low volume holiday market, with a mild positive bias. Last Friday, Nifty futures opened slightly lower  than the previous day's last traded price and almost immediately recorded a low of 5966. This low was 5 points below the previous three trading day's low at 5971. Since low volume holiday markets are liable to record freak trades, this author had also indicated that traders may carefully observe any breach of the three day  old narrow  trading range as well as the breach of the inside day candle of Thursday. Now let's check the intra-day chart of Nifty futures to find what happened on Friday.  

   Nifty Futures - Intra-day Chart    

Friday, December 24, 2010

Merry X'mas !
   Wishes All Readers   
Merry Christmas 

Update for 24th December 2010

  Holiday Trading At It's Best ?

In the last update, this author had indicated that market may trade in the sideways to mildly positive mode on Thursday. As expected, Nifty futures opened flat on Thursday.  But the expected test of the 6030 levels petered out at the previous day's last traded price of 6012. As any market in a holiday trading mood wont to do, Nifty futures too traded sideways for the whole trading day. The day's low was at 5981. The low of 5981 ramained above the lows of the previous two trading days. The last trade was at 5996. The following intra-day chart of Nifty futures shows the low volume listless trading seen on Thursday. 

   Nifty Futures - Intra-day Chart   

Thursday, December 23, 2010

Update for 23rd December 2010

      Nifty Future Finding it Tough to Hold on to Gains ?

As expected, Nifty Futures opened higher at 6025 and within a short time of trading, it went above the 6030 reference point. It seemed that Nifty futures may trade higher in the process of testing the highs. However, the markets seemed to be stalling just above the 6030 mark, with lack of enthusiasm to trade higher indicated by  low volumes.  After spending almost an hour above the 6030 mark, the Nifty contracts traded below the 6030 mark. Till around the 1.30 PM mark, trading remained inside a narrow range just below the 6030 level . However, when the European markets opened and later traded mildly in to the negative territory, Nifty future too started to trade lower. The market heavy weight stock, Reliance seemed to be leading the ensuing fall on the back of news related to some cost escalation in the gas production business. Banking sector also seemed to be making losses for the day. Nifty futures recorded a low of 5977 in the mid afternoon mini sell off. However, the selling stopped before the futures pierced the previous day's low of 5970. The contracts recovered some of the losses and closed for the day at 6012.

     Nifty Futures - Intra-day Chart    

Tuesday, December 21, 2010

Update for 22nd December 2010

     Nifty Future Closes Above 6000 !  

On Tuesday morning, most Asian markets were trading in the positive territory at the opening time of Indian stock markets. Nifty Futures opened higher at 5976 on the back of the positive momentum from it's Asian counterparts. It also recorded the day's low of 5970 at the opening itself. On the back of some new found strength seen in the banking stocks, Nifty future advanced to test the present swing high of 6000 in the first hour of trading. It succeeded in crossing the 6000 mark but further advances were not easily forthcoming. As such, it traded in a very narrow range of 20 points between the 6000 and 6020 marks for most of the trading day. The day's high was at 6022 and the close was at 6014.

   Nifty Futures - Intra-day Chart   

Monday, December 20, 2010

Update for 21st December 2010

    Nifty Future is Still in the Sideways Mode !  

After the long weekend, when the indian markets were opening for the new week, Asian markets were trading with losses on the back of tensions in the Korean peninsula.  The SGX Nifty future was also quoting below the previous close. Accordingly, Nifty futures too opened lower near the lower reference point at 5900. Trading remained between the  5900 and 5940 reference points in the first two hours of the trading day. But the recovery rally after the gap opening continued even though the Nifty contracts encountered some minor selling at the 5965 and 5990 levels. The day's high was at 6000. But the afternoon session saw a mild correction when Nifty futures traded lower to reach 5950. The close was at 5953. 

   Nifty Futures - Intra-day Chart    

Sunday, December 19, 2010

Update for 20th December 2010

    Nifty Future Poised at an Interesting Point !  

In the last update for 16th December, we had stated that Nifty future is primarily trading in a 200 point range between 5800 and 6000 and not much reasonable analysis is possible. We had also stated that the outer or broad limits of this range are at the 5700 and 6100 levels. It was also stated that the incidence of the 100 day moving average ( 100 DMA ) coinciding with the reference level of 5860 is important.  Now let's check what happened  in the last Thursday's trading session.

   Nifty Futures - Intra-day Chart    

Thursday, December 16, 2010

Surviving in the Trading Jungle !

Why Do So Many Smart People Fail in Trading ?   

Here is a secret ! In fact it is not a secret ! Majority of traders make losses. Among investors too, most make less than the average returns made by investing in an index like Nifty or BSE Sensex.  But not many people talk about it in the open. But why ? Everybody likes the winners, OK ?  We always hear about the super profits !   And no one talks about the losses. 

The first reason for major losses is the over confidence in one's trading ability. Another reason is the absence of trading discipline and stop losses. However, the most important reason for a  blow up or total ruin of the trading account is relatively huge trading ( leveraged ) positions.  Here is an article on how to prevent the total blowup of your trading account !  It may not make you a super trader overnight. But it will certainly help you to last longer in the trading game till you learn the trade !!

Happy reading over the long week end !

Click Here to Read the article on Preservation of Trading Capital, Money Management and Position Limiting

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Disclaimer: No research, information or content contained herein or in the accompanied spreadsheet shall be construed as advice and is offered for information and educational purposes only. We shall not be responsible and disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered by the user or any third party as a result of or which may be attributable, directly or indirectly, to the use of or reliance on any information or service provided. All files/information is provided 'as is' with no warranty or guarantee as to its reliability or accuracy. We do not recommend, promote, endorse or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed on the site by google adsense.

Wednesday, December 15, 2010

Update for 16th December 2010

   Nifty Future Declines On Bear Raid !  

It seems that the season of scams is here to stay. On Wednesday too, there were reports about new CBI raids related to the ongoing 2G scam investigations. It seems that bears also have made it a habit to raid the Dalal Street on all days some CBI raids take place. It also seems that the market is more susceptible to bad news now a days, may be because of the extended valuations and the questionable governance standards employed by many a corporates. 

On Wednesday, Nifty futures opened at 5951, just 7 points below the previous day's last traded price. Immediately after the open, it sold off to trade below the reference level of 5940 and almost reached the lower reference level at 5900. Since the contract sold off without trading at the previous close or the last  traded price,  a recovery ensued by around the 11.00 AM mark. However, the recovery failed after reaching to a high of 5955, thereby leaving very small subtle gap between the day's high and the previous close. Regular readers of this update might be familiar with this kind of subtle gaps which at some times indicate further weakness in the markets. However, such gaps may not have much predictive ability in range bound markets. Trading remained range bound in the 5900 to 5940 area till around the 1.30 PM mark. However, when European markets too went in to the negative territory, Nifty futures too broke the 5900 mark to record a low of 5873 in the afternoon session. However, the close was at 5896.  

  Nifty Futures - Intra-day Chart   


Tuesday, December 14, 2010

Update for 15th December 2010

   Nifty Future Advances Further ! 

On Tuesday, Nifty futures opened exactly  where it closed on the previous day at 5931. In the initial phase till around 11.30 AM, the contract traded sideways mostly and kept itself below the resistance of 5940. It broke above the 5940 mark just after the announcement of a lower inflation figure. However, even after the breakout, trading remained mostly sideways. The day's high and low were at 5970 and 5906 respectively. The close was at 5959. The overhead resistances at  the 6000, 6030 and 6090 levels still remain valid. The following intra-day chart of Nifty futures show the two phases of Tuesday's trading, both before and after the declaration of inflation data.

  Nifty Futures - Intra-day Chart   

Nifty Futures - Daily Chart        

Monday, December 13, 2010

Update for 14th December 2010

  Nifty Future Recovers Further, But Resistances Still Remain ! 

The last post indicated that "last Friday's green candle with it's open below the previous candle's body and a close which was above the 50 % mark of the previous red candle's range indicate the support at lower levels and even a short term reversal." It was also reported that the overhead resistances remain at the 6030 and 6090 levels and until these resistances are broken, the pattern of higher high, lower low and lower high may remain. Nifty futures opened on Monday with a freak trade at 5985, even though the actual opening rates were exactly 100 points lower at 5885, near the previous day's last traded price.  Since Nifty futures never actually traded up to the freak rate of 5985 on Monday,  the daily high  stands corrected to the actual high of 5940. All charts on this site are prepared using the corrected open and  high prices and therefore, these charts may differ from other automated charting services. The intra-day chart of Nifty futures also shows the open at the 5885 area.

  Nifty Futures - Intra-day Chart     

Sunday, December 12, 2010

Update for 13th December 2010

 Nifty Futures Recover to Close Above the 100 Day MA !

The last post conveyed that the Indian market is going through a peculiar situation on the back of the rumors and other pieces of bad news and therefore, any clear analysis of what happens on a particular  a trading day is beyond anyone's capability. However, it was also clearly stated that Nifty future has 'some support at the 5725 to 5750 area being the previous low and from the top line of the  previous trading channel.'  The indicated reference points  for Friday's trade were at  5650, 5750, 5830, 5860 and 5900. The intra-day  chart of Nifty futures is given below to examine the last Friday's market action.

  Nifty Futures - Intra-day Chart     

Friday, December 10, 2010

Update for 10th December 2010

Nifty Futures Close Below the 100 Day MA !

The last post was titled "Nifty Heavy Weight Stocks Also Turn Losers !", but this author couldn't have anticipated the kind of  losses suffered by the market on Thursday. Even though the previous posts could report about the lack of volume, all round negative market internals and a deteriorating Put Call Ratio ( PCR ), the losses were beyond expectations. It seems that the excesses of the recent bull market and especially the operators and FII led the vertical rally from the  5550 level to the previous high of 6300 plus levels, is being set right by the market now. Now, on observing the all round losses suffered by many traders and investors, this author is forced to reproduce some quotes from the post dated  9th September, 2010,  which talked about the then bull fury and it's possible excesses and after effects.       

Excerpts from the post dated  9th September, 2010

"Any breakout above the trend channel may be associated with a mad scramble to get in to stocks by the retail crowd. The tipsters and talking heads will have their time in the lime light. Analysts will start finding new reasons for buying stocks at high prices.  Euphoria will prevail. And no resistances will stand in the way of the mad bulls. All the dud stocks may become the favorites of the masses once again. And when the  bubble bursts, another set of traders and investors will learn their stock market lessons. ( To read another short description of this scenario, click here to read the post dated 23rd August, 2010. )   

To those readers who might  be wondering why this blogger is hell bent against another super duper rally in the stock markets, let it be made clear that this blogger is not hell bent against any rally or otherwise.  It is only because this blogger likes an orderly stock market which leaves some scope for appreciation for the buyers in the long term. If the market overshoots on the upside, it will lead to all kinds of non sustainable investments and this in turn will lead to bad markets tomorrow. Higher stock prices makes dubious companies raise capital for questionable  projects which will fail at the first signs of economic hurdles. In the end, an overpriced market is as bad or far worse for the economy than an under priced market. In fact bubbles leads to wealth destruction than the claimed wealth creation."

  Nifty Futures - Intra-day Chart     

Wednesday, December 8, 2010

Update for 9th December 2010

Nifty Heavy Weight Stocks Also Turn Losers !

It was reported in some of the previous posts that market lacked volumes at just above the 6000 mark of the Nifty Index. It seemed that trading at the recent top was very sluggish and lacked enthusiasm. It was also opined that Nifty future may try to move out of the narrow range in the early part of the week. The last two  posts also reported that market internals, as seen by the advance decline ratio, seemed to be very negative and traders may exercise caution. It was also stated that a reentry in to long position is not advisable because of  added risk. The Nifty heavyweights seemed to be unaffected by the overall negative market mood on the back of the new found strength in the oil and other commodity stocks. Even though Nifty future was expected to test the 6030 level as indicated in the previous post, finally, the prevailing negative mood caught up with the Nifty heavy weight stocks too, on Wednesday.  By the time market opened on Wednesday, the late positive momentum of  previous day seemed to have been vanished in to thin air. Nifty futures opened some 35 points below the last traded price because of the negative indications. The open remained as the day's high and the morning session's trading was mostly centered around the 5940 reference rate. 

 Nifty Futures - Intra-day Chart    

Update for 8th December 2010

  The Break of Low Also Fails and Now What ?

In the previous post it was opined that Nifty future may continue with the downward movement seen on late Monday and try to test the 5940 support below. However, it was also mentioned that even if the futures contracts trades down to the 5940 levels, it might still be in the positive momentum area. As expected the futures traded down on Tuesday after opening slightly higher at 6005. However, the expected test of 5940 ended at a higher point at 5956, on the back of the strength in the Reliance stock and other commodities stocks. However, the market breadth remained negative with widespread losses in the banking, mid and small cap sectors. As the Nifty future is still trading in the positive momentum area, it recovered at the second half of the trading session.

Nifty Futures - Intra-day Chart     

Tuesday, December 7, 2010

Update for 7th December 2010

   A Breakout, It's Failure and What Next ?

It's been proven again that support and resistances can be found out only by keen observation of the market action and not by applying any simple mathematical formulas as advised many others. It was being indicated on this site that Nifty future has resistances at 6030 and 6090 levels for the past three or four trading days. Now, please check out what happened in trading in the last three days. Nifty futures traded below the indicated resistance of 6030 for most of last Thursday and Friday and the daily highs were very near to 6030. And on Monday, Nifty futures broke out above the 6030 level and went straight to the next resistance of 6090 and recorded a high of 6094. The buy signal originated by the Momentum Signal trading system in the Nifty futures at the 5982 level as on 1st December 2010 achieved a maximum favorable excursion of 110 points. Or put in simple English, the long  position entered at 5982 could have been sold at the 5090 resistance level leading to clear profit of 100 Nifty points.  

Nifty Futures - Intra-day Chart        

Sunday, December 5, 2010

Update for 6th December 2010


   Two Days of Indecisive Trading and What Now !  

As part of the scenario analysis given in the last Friday's post, it was stated that if the Nifty future was unable to cross the previous day's high, it may try to revisit the 5860 support or even lower levels. However, this scenario was expected only in the absence of positive international cues. In spite of the western markets continuing their uptrend, Nifty futures opened flat on last Friday and enacted a part of the scenario by trading below the previous day's low. However, the positive international cues prevented the Nifty future and the index heavy weights from  losing much on Friday.  The advance decline ratio showed a very negative picture on Friday because of wide spread losses in many stocks. The market also lacked volumes on Thursday and Friday, may be because of the lack of enthusiasm ( ? ) to trade at the present levels. 

Nifty Futures - Intra-day Chart        

The intra-day chart above shows the lackluster trading  seen on last Friday. The upper horizontal line show the 6030 resistance area and the lower, the low of last Thursday.

Friday, December 3, 2010

Update for 3rd December 2010

   Nifty Future Ends Higher, But Ends Flat Intra-day !  

Nifty future was expected to open higher on Thursday on the back of the fresh buy signals in the contract and the BSE Sensex  and also because of the overnight rally in the European and US stock markets. The last post indicated that the immediate higher resistance above the market is at 6030 level. Therefore, Nifty future opened higher but remained just below this level not only at the open but also for most part of the trading day. As the futures found it difficult to cross the resistance, especially after a fast and significant rally in the previous two trading days, it tried to test the previous day's last trade or at least the previous day's high. This test ended exactly at the previous day's high at 5991. Since the trading was confined to a tight range, the futures tried to test the highs as well as the 6030 resistance at the fag end of the trading day. It partially succeeded in breaking the resistance but  closed below the resistance at 6026. Now, lets check the intraday chart of the Nifty futures to find why this might have happened and also to understand an intraday day trading technique which could be used in very narrow ranged markets.

Nifty Futures - Intra-day Chart        

Thursday, December 2, 2010

Update for 2nd December 2010

  December too Starts with a Bang !  

We stated in the last post that a test of the 5940 area by the Nifty future was expected, since the market  is bouncing from the 100 DMA and it had already tested the breakout point of 5865. It was also stated that closes above the 5940 level will indicate trend reversal as it will lead to the Nifty futures going back to  the previous trading range. Now both these conditions have been met and it can be considered that the present downtrend has finished. Or put in other words, it has become a buy on decline market. 
Nifty Futures - Intra-day Chart   

Wednesday, December 1, 2010

Update for 1st December 2010

  Nifty Future Breaks the Resistance at 5865, But 5940 Stays ! 

The last post indicated that since the Nifty future was unable to surpass the two day high at  5865, the contract may  test of the lower end of the trading range before trying to break above this reference point. It was also indicated that Nifty future has support at the 5750 to 5775 area and the top end of this support also coincides with the 100 day moving average. Now, let's check what happened during  Tuesday's trading. Even though the contract recorded an open of 5850, the actual trades in the initial minutes were below the 5820 levels. It is normal for markets to trade in very flat ranges before the announcement of any major market moving economic data. As the second quarter GDP data was  due by 11.00 AM, Nifty futures traded sideways till that time but stayed inside the tight range between 5915 and the previous day's low of 5788.

Nifty Futures - Intra-day Chart