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    

Nifty futures opened flat on Thursday and tried to test the lows of the previous day. In fact it succeeded in breaking the previous day's lows, but the probe being accompanied with  low volumes at the lower levels failed near the reference level of 5860  and reversed from there. Once the market participants understood the significance of this failure of the test of lows, the consensus of market participants almost changed suddenly to the diametrically opposite position. A sharp rally ensued once Nifty futures traded in to the previous day's range. And the rally easily went through the higher reference level of 5940 too on the back of the changed market consensus. The day's high was at 5980 and the close was at 5860.

Nifty Futures - Daily Chart 

Nifty future is interestingly poised in the daily charts at present. Last Thursday's high of 5980 almost coincided with the falling trend line obtained by joining the previous two highs. ( See the chart above ). The last close of BSE Sensex was almost exactly at the trend line as on last Thursday. Nifty future is poised to intercept the falling trend line at the 5965 level on Monday. Nifty future is expected to trade above the said falling trend line on Monday, barring any very unforeseen events, but it may again find resistance at the 6030 and 6090 levels. The lower supports are at the 5940, 5900 and 5860 levels. So long as the contract trades inside the broad trading range between 5700 and 6100, trading can be considered side ways and the pattern of higher high and a lower high indicating some weakness may remain.

Nifty Futures - Moving Averages Chart  

The above moving averages chart of Nifty futures shows that the contract is trading between it's 100 and 50 day moving averages ( DMAs ). The 20, 50, 100 and 200 DMAs of Nifty future are placed at 5920, 6055, 5860 and 5540 respectively at present.

S&P Nifty Index - Weekly Chart

Nifty index is still trading inside the new trading channel from the second half of September 2010. The index has already reversed twice  from the lower boundary of the new trading channel or the upper boundary of the previous channel. During the week ahead, the support from this lower boundary is present at an index level of 5775. The upper resistance for the index is at the four week high at 6075 levels placed at the middle of the new trading range.

Nifty Option Scene

The December series Nifty Index options Put Call Ratio ( PCR ) improved to 1.30 levels on the back of the rally on last trading day. However, the implied volatility indicated by the  India VIX closed above the 20 mark at 20.04 even after  a 5.51 % loss.  Nifty Put options open interest ( OI ) increased by 7.4, 5.6 and 6.5 lakhs at the 5800, 5900 and 6000 strikes on Thursday. OI of Nifty 6000 Call options decreased by 6.5 lahks and of 6200 call options increased by 4.3 lakhs. The highest OI of put and call options are placed at the 5800 and 6000 strikes respectively as at the end of last week.

Nifty Trailing Fundamentals

The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.74,  3.75 and  1.05 as on  16th December 2010. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page ).   

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 has indicated a buy as on last Thursday after indicating a sell on the previous day. Readers may please take note that the Momentum Signal system has a tendency to indicate whipsaw trades in range bound markets as pointed out in various posts. 

Projected Momentum Signal Close Values

The projected levels of 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  20th December, 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 the figures are not intended to be interpreted as 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.

Readers are requested to go through the Risk Factors, Risk Analysis, Position Limits and FAQs pages of this blog to gain a reasonable understanding of the trading system. Please do post your 
comments and suggestions on how new  posts can be made more useful.
Cheers and Prosperous Investing and Trading !!!

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