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     

Nifty future opened near Thursday's low and the day's low of 5748 was established almost at the reference point of 5750. Thereafter, the contract recovered to the previous day's last traded price of 5785. Once the contract traded above this level, the futures immediate went to the 5830 reference level. As no significant selling emerged at this level, the contract traded up to the 5860-5865 level by around 11.00 AM. Trading remained range bound between the two reference points at 5830 and 5860 till around 2.30 PM. In the last hour of trading, Nifty futures tried  to trade higher towards the next reference level of 5900. However, Friday's high was limited to 5888 and the close was at 5875.  The important reference levels for Monday's trading are again 5750, 5830, 5860, 5900, 5940, 5990 and 6030.

Nifty Futures - Daily Chart        

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. The last week's close is in the middle of the present trading range and therefore, the immediate direction of the market is unclear. The chart shows that Nifty future has established a weak pattern of a higher high, a lower low, a lower high at the 6350, 5725 and 6090 levels. The contract is presently reversing from the support at the previous low between 5725 - 5750. Now the important question is whether Nifty futures breaks above the lower high at the 6090 - 6100 levels. Until this break out happens, a break of the lower support or sideways trade inside the present range is possible.

Nifty Futures - Daily Moving Averages    

Nifty future is trading between it's 50 and 100 day simple moving averages ( DMA  ) at 5838 and 5074 respectively. The latest 20 and 200  DMAs are at 5944 and 5520 respectively.

Nifty Index - Weekly Chart

The weekly chart shows the top boundary line of the previous trading range extending support to the index at the 5720 levels. Market has already reversed from this line twice and therefore, a break of this support can  lead to deep corrections which may extend even to the lower boundary line of the previous trading range.   

 Nifty Option  Scene  

The December series Put Call Ratio ( PCR ) improved slightly to 1.1 on Friday on the back of the rally. Significant reduction of Nifty call options open interest ( OI ) were seen at the strikes at 5900 and 6000 to the tune of 9.5 and 11.7 lakhs respectively. The strikes at 6100 and 6200 also saw reduction of call open interest. Significant reduction Put OI was also seen at the 6000 and 6100 strikes to the extent of 10.8 and 4.8 lakhs. However, the Put OI increased significantly at 5700 and 5800 strikes to the tune of 8.7 and 13.7 lakhs respectively.

Nifty Trailing Fundamentals 

The trailing PE multiple of Nifty index again moved above the 23 mark. The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.35,  3.69 and  1.07 as on  10th 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 :
Momentum Signal has stayed in the negative territory on the day time frame charts with a value of  -50. Please note that the latest sell signal was generated very near to the support level and therefore, would have made a loss of 76 Nifty points. ( If the Trailing stop was kept at 5868 ie 2.1 % above low, Short entered at 5792. ) The trailing stop at 2.5 % from the low is at 5994 and a stop at 2.1 from the short entry at 5792 is at  5914. If the market moves beyond these levels, it confirms that the sell signal has been a whipsaw.

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  13th 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 suggestions and comments on how this blog can be made more useful.
Cheers and Prosperous Investing and Trading !!!

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