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   





Nifty Futures  - Daily Chart       


Nifty future as well as the two tracked indices, S&P Nifty and BSE Sensex have closed above their respective 50 day moving averages as on 29th December 2010. However, Nifty future is still trading just below the previous upswing's high of 6093. This high of 6093 may still act as a resistance on Thursday.  If the contract beaks this resistance at the 6090 to 6100 levels, we may presume that the contract has broken out of the higher high, lower low, lower high pattern for the time being. The higher resistances are at 6175, 6250 and 6325 to 6350 levels. In case of any weakness in the futures contract in the next few days, traders may carefully observe the market action at the 6030 and 6000 levels for further analysis and intra-day trading purposes. Since the markets are still trading in an area where it has spent significant time, almost all previous reference levels may extend some influence in trading.  

Nifty Option Scene 

The Put Call Ratio ( PCR ) of  December series Nifty options increased significantly to 1.78 times as on  Wednesday. Massive Put writing was seen at the 6000 strike in the December series, which expires on Thursday.  The additions to the 6000 Put open interest ( OI ) amounted to 1.9 million. Some additions to the  Put OI was also seen at the 6100 strike.  In addition, massive Call option covering  was also seen at the 6000 strike. The OI figures for the December series 6000 Call decreased by 1.5 million. Covering of Call options  was also seen at other strikes lead by the 5900 strike. The highest OI levels of Dec. Calls and Puts are still at the 6100 and 6000 strikes. Even though it remains to be seen whether the December series Nifty expires above the 6100 levels, the present OI positions certainly precludes an expiry below the 6000 level. The Option Pain chart of December Series Nifty options shown below also indicate a range bound market between the 6000 to 6100 strikes. However, it remains to be said that sudden volatility associated with the derivative expiry could happen in the last half an hour of trading on Thursday belying all expectations.   
    
 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 24.19,  3.82 and  1.03  respectively as on  29th 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 :


The buy signal indicated at the 5960 levels as on 15th Dec. 2010 has already recorded a favourable excursion of more than 100 points in the Nifty contracts. The best thing about the signal was that the position never even once went in to an adverse excursion, even though it took a long time for the contract to gain this much.  Nifty futures and both the indices, viz. S&P Nifty and BSE Sensex have closed with Momentum Signal values of +100 as on Wednesday.  

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  30th 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 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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