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        


The horizontal line at the top end of the chart shows the 6030 resistance. It can be seen that the contract traded to a high of 6032 right at the open and then went to test the previous day's high of 5991 in the first hour of trading. Thereafter, the market recovered but the recovery petered out at 6022. The next recovery too failed at 6017 and the test of the low  failed again at 5993. Now the question is : What should the market do if it's being confined to such narrow ranges ? It will try to test the other extreme. But for intraday traders there is a trade opportunity in this situation. Please see that the trading range till 2.45 PM was narrowing and the trading was confined below the falling trend line seen the chart. Nifty futures intersected the falling trend line exactly at 6015. Now, what could be a target for this bounce or mini breakout ? The answer is simple. Add the trading range below the intersection point to the intersection point. The range below the intersection point was 24 points. ( 6015 - 5991 = 24 ). Adding this 24 points with the intersection point of 6015 will get the target as 6039. ( 6015 + 24 = 6039 ). Now check the day's high ! It's 6038.90 !!!. But here is a disclosure. In the example shown above, this intra-day scalping technique for narrow range markets worked with clock work precision. But it may not always !   
 
After having reached the target of this narrow range mini breakout, Nifty futures came back below the 6030 level and closed at 6026.

 Nifty Futures - Daily Chart    


As the Thursday's open and the close were same, a doji candle has been formed in the daily chart. Doji candles indicate indecision or a pause. If strong cues from international markets are not available or if Nifty future is unable to break above the Thursday's high, there are ample chances of the contract trying to test the 5960, 5940 levels and even the 5900 mark on Friday. However, the overnight rally seen in the European and US markets at the time writing may help the market to rally further to test the higher resistance at the 6090 - 6100 level on Friday.

Nifty Option  Scene  

The December series Nifty options Put Call Ratio ( PCR ) remained at  1.30 on Thursday. Significant additions to the Put open interest were seen at the 5900 and 6000 strikes on Thursday.  The additions to Call open interest were seen from 6100 to the higher strikes till 6400.
 
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 23.96,  3.78 and  1.04 as on  2nd December 2010. Readers may please note that the periods in which the trailing PE Ratio of  the Nifty index persistently  stayed above the 25 mark  were limited to just  two occasions in the years 2000 and 2007-08. And both these periods coincided with the highs or bubble periods just before the burst of the then bull markets. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page of this blog ).
 

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 :
 
 
After triggering fresh buy signals on Nifty futures and BSE Sensex  on Wednesday, the Momentum Signal system has  confirmed the buy in the Nifty index too as on Thursday.

Projected Momentum Signal Close Values

The projected levels 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  3rd 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 are in no way 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.

All readers are requested to read the Risk Factors, Risk Analysis, Position Limits and FAQs pages of this blog to have a reasonable understanding of the 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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1 comment:

Markus Heitkoetter said...

Hello friends,

Nifty future opened higher but remained just below this level not only at the open but also for most part of the trading day. Thanks!
Day Trading Technique