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    

In addition to the reference levels of 5860, 5900, 5940, 6000, 6030 and 6090 traders may carefully observe the market action around the 5965 - 5970 area, being the lower boundary of the past five day's trading range. Barring a sell off on the back of some unknown reasons, market seems to be poised for some more sideways trading, at least till the end of the year, because a lot of the bonuses of fund managers are  decided on the basis of the yearly profits.

Nifty Option Scene  

The Put Call Ratio ( PCR ) of  December series Nifty options increased slightly  to 1.52 times as on Monday. The changes in the open interest positions were also nominal. The highest OI positions in the December Call options remain at the 6100 strike. The highest OI positions of Dec. Nifty puts are more or less evenly spread from the 5600 to 6000 strikes.  These OI positions might be indicating  a range bound market between 5900 and 6100 strikes. The increase in the Put Call ratio still favors a mild positive bias to the market in the short term or at the least, it precludes an immediate deep sell off before the current month expiry. The Option Pain chart of December Series Nifty options shown below also indicate a range bound market between the 5800 to 6100 strikes.  

 Option Pain Chart - December Series Nifty Options

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 23.94,  3.78 and  1.04  respectively as on  27th December 2010. ( More information and a long term analysis on Nifty historical valuation are 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 again closed with +100 value as at the end of trading on  Monday. Readers may please take note that the Momentum Signal system has a tendency to indicate whipsaw trades in range bound markets. This fact has already been  pointed out in various previous posts as well as in the Risk Factors

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  28th 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.

A lower close on Tuesday may indicate an exit of the existing long positions entered as per indications the Momentum Signal trading system as on 16th December, 2010.

Readers are requested to go through the Risk Factors, Risk Analysis, Position Limits and FAQs pages 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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