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Wednesday, December 8, 2010

Update for 8th December 2010

  
  The Break of Low Also Fails and Now What ?

In the previous post it was opined that Nifty future may continue with the downward movement seen on late Monday and try to test the 5940 support below. However, it was also mentioned that even if the futures contracts trades down to the 5940 levels, it might still be in the positive momentum area. As expected the futures traded down on Tuesday after opening slightly higher at 6005. However, the expected test of 5940 ended at a higher point at 5956, on the back of the strength in the Reliance stock and other commodities stocks. However, the market breadth remained negative with widespread losses in the banking, mid and small cap sectors. As the Nifty future is still trading in the positive momentum area, it recovered at the second half of the trading session.


Nifty Futures - Intra-day Chart     




The intra-day in Nifty futures remained more or less around the new reference level ( given in the previous post being  Monday's and Thursdays low ) at 5990. The trading remained in a very tight range for most of the trading day too.  A keen observation of the intra-day chart shows that Tuesday's trading also provided another of those text book cases of useful scalping method for the a narrow range intra-day market. This trade would have been  able to generate a profit of nearly 25 points. ( Please see the post dated 3rd December for deatiled description of the trading method.). Nifty futures closed almost at the day's high at 6020.


Nifty Futures - Daily Chart   


As the market recovered from the test of lows, Tuesday's candle has again seen with a long tail at the bottom. Nifty futures closed with a premium of 35 points on Tuesday. As the European markets have closed with strong gains and the US market indices are trading with gains of more than half a percent at the time of writing this post, the market may make another try to test the higher reference points at 6030 and  6090 levels. Since the overall market is not exhibiting much strength, traders may remain cautious.  The reference levels  indicated in the previous posts still  remain valid for Wednesday's trade.

Nifty Option  Scene       
The December series Nifty options Put Call Ratio ( PCR ) more or less remained at 1.25 on  Tuesday.. Additions to the Put open interest were seen  at the four strikes from  5700 to 6000 and 6100  Tuesday.   The Call open interest additions were seen from the 6000 to 6400 strikes. 
Nifty Trailing Fundamentals      



Nifty's trailing valuations too remained static on Tuesday. The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.82,  3.76 and  1.04 as on  7th 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 :

The Momentum Signal remained still at the maximum possible level of +100 as on Tuesday.


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  8th 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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