Thursday, January 20, 2011

Update for 20th January 2011

  A Tentative Close, But What Now ?

We had opined in the previous post that the present up move from just about the 200 DMA seemed to a tentative one and lacked enthusiasm.  Wednesday's down move has vindicated that opinion. On Wednesday, Nifty futures opened flat at 5740 and almost immediately went on to retrace the small up move it made in the last half an hour of the previous trading day. After recording a low around the upper range ( 5710 ) of the previous day's intra-day narrow trading range, the Nifty contracts tried to rally again tentatively. It recorded a high of 5754 in the middle of the day. However, a break of the rising trend line seen in the intra-day charts of the contract, saw another bout of sudden selling made apparently by the day traders. Nifty futures fell to 5661 in this bout of selling, but recovered to close at 5697 for the day.

Nifty Futures - Intra-day Chart

Nifty Futures  - Daily Chart  

The last candle in the daily chart has engulfed the previous day's green candle. Nifty futures broke the low of the previous candle, that too after trading above the previous candle's high on Wednesday. Naturally, this might have lead to further downsides in the markets just because of the fact that  the fall came later. However, the tentative close, almost right in the middle of the previous day's range, has made the next direction of the futures quite indecipherable as of now. Therefore, traders may remain alert in the next  few days for moves in either direction or even sideways non-moves. All the previously indicated supports and resistances also remain unchanged as of now.

  Nifty Options Scene  

The January series Nifty options Put Call ratio  decreased even further to an unusually low and bearish looking 0.68 times as on  19th January 2011.  In spite of the market falling a bit, the India VIX  decreased to 21.09, losing 1.72 %. Some additions to the January Call options ( or call writing ) were seen at the  5700, 5800 and 5900 strikes. The highest number of Nifty Call option OI is still at the 6200 strike even though many lower strikes from 5700 and upwards have significant OI outstanding. Some  more additions to Put option OI was seen at the 5500 strike.  However, covering of short options, both calls and puts were also seen at various strikes. The highest open interest ( OI ) of Put options has remained at the 5600 strike as on  Tuesday.  This option OI data seems to suggest that Nifty may trade sideways in a  range between 5500  and 5800 as of now. The January series Nifty Option Pain chart also shows a steep right side, depicting the heavy short calls positions, which might act as a resistance to the recovery.   

Nifty Option Pain Chart - January Series  


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 22.51,  3.59 and  1.09  respectively as on  19th January 2011. ( 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 Momentum Signal has closed with a value of -100, indicating maximum negative momentum for the ninth consecutive day. 

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  20th January, 2011, 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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