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Wednesday, December 8, 2010

Update for 9th December 2010

Nifty Heavy Weight Stocks Also Turn Losers !

It was reported in some of the previous posts that market lacked volumes at just above the 6000 mark of the Nifty Index. It seemed that trading at the recent top was very sluggish and lacked enthusiasm. It was also opined that Nifty future may try to move out of the narrow range in the early part of the week. The last two  posts also reported that market internals, as seen by the advance decline ratio, seemed to be very negative and traders may exercise caution. It was also stated that a reentry in to long position is not advisable because of  added risk. The Nifty heavyweights seemed to be unaffected by the overall negative market mood on the back of the new found strength in the oil and other commodity stocks. Even though Nifty future was expected to test the 6030 level as indicated in the previous post, finally, the prevailing negative mood caught up with the Nifty heavy weight stocks too, on Wednesday.  By the time market opened on Wednesday, the late positive momentum of  previous day seemed to have been vanished in to thin air. Nifty futures opened some 35 points below the last traded price because of the negative indications. The open remained as the day's high and the morning session's trading was mostly centered around the 5940 reference rate. 


 Nifty Futures - Intra-day Chart    




Since the Nifty future was unable to trade above the 5950 mark, another wave of selling emerged by around 12 Hrs. Nifty futures traded down to the next reference level of 5900. Trading in the latter half of the session remained in the range between 5900 and 5940. The close was at 5925.

Nifty Futures - Daily Chart     


The above daily chart  shows that Nifty future has already formed a lower low and it might be forming another lower high too. However, market may yet form a higher low and reverse from there. Nifty future has lower supports at 5860 and 5750 levels. The 100 DMA of Nifty future has moved up in the meanwhile and is presently at the 5830 level. The important reference levels for Thursday's trading are 5830, 5860, 5900, 5940, 5990 and 6030. Traders may note that all these reference levels have some relation to the previous trading action.

Nifty Option  Scene   

The Put Call Ratio ( PCR ) of December series Nifty options has deteriorated significantly to 1.13 as on Wednesday. Significant call writing to the extent of 16 lakhs was seen at the 6000 strike. The 6100 and 6200  strikes also saw call writing to the tune of 7 lakhs each. However, Put open interest ( OI ) decreased by 7, 7.5, and 3.2 lakhs at the 6000, 5900 and 5800 strikes respectively, indicating covering by the writers or profit booking by the buyers. Some additions to the Put OI were seen at the lower strikes at 5700 and 5600. The lower PCR might be indicating further weakness in the market.


Nifty Trailing Fundamentals  
     


The trailing valuation of Nifty index too decreased  a bit  on Wednesday. The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.53,  3.72 and  1.05 as on  8th 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 has fallen to the +20 neutral levels for the two indices and Nifty futures.
 
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  9th 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.

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.
 
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