Another Intra-day Bounce, But What Now ?
We used the title " A Tentative Close, But What Now " for the last post, because of the peculiar nature of market close seen on Wednesday. We said that, though the bearish engulfing candle may be indicating an immediate down move, the tentative close might be an indication for a move in either direction. Therefore, traders were advised to be extra careful and alert for fast movements in either direction on Thursday or the following day. Nifty futures opened below the previous day's trading range due to the negative international cues on Thursday. The futures contract tried to recover, but the move failed at around the 5680 mark. Another tentative down move saw the contract almost revisiting the recent swing lows. However, the tentative down move in the morning session also lacked volumes. Therefore, the ensuing recovery actually became a frantic short covering rally which traveled around 100 points in just one and a half hours. Nifty futures closed at 5722 after recording a high of 5744.
Nifty Futures - Intra-day Chart
Nifty Futures - Daily Chart
Nifty futures have already spent more than four and a half days trading inside a tight trading range between 5640 and 5750. The support offered by the 200 DMA at around the 5610 - 5620 area has stood firm so far, in the test of support on at least three occasions in the past five days. If the overseas cues permits, Nifty future may test the higher reaches of the trading range between 5750 and 5775 levels as a follow up action on Friday. In case the Nifty contracts breaks these resistances, it may reach the next higher resistances at the area between 5850 and 5875 levels. However, barring further recovery above these levels, the chances of another test of the 200 DMA and even a break of the same may remain in the medium term.
Nifty Options Scene
The January series Nifty options Put Call ratio remained unchanged at an unusually low and bearish looking 0.68 times as on 20th January 2011. The India VIX also remained almost unchanged at 21.01, losing just 0.38 %. Significant decrease or covering of January Call options was seen at the 5700 strike. 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 were seen at the 5500, 5600 and 5700 strikes. The highest open interest ( OI ) of Put options has remained at the 5600 strike as on Thursday. This option OI data seems to suggest that Nifty may trade sideways in a broad range between 5600 and 5900 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 22.59, 3.60 and 1.09 respectively as on 20th 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 Momentum Signal has closed with a value of -80, indicating the waning of negative momentum after indicating the maximum negative momentum for nine consecutive trading days. In the absence of another heavy fall on Friday, the momentum signal may indicate neutral momentum as on the close of market on Friday.
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 21st 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.
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Cheers and Prosperous Investing and Trading !!!
To access and/or download the free online Position Limit Calculator click here.
To checkout the five year history of The Momentum Signal Spreadsheet click here
Disclaimer: No research, information or content contained herein or in the accompanied spreadsheet shall be construed as advice and is offered for information and educational purposes only. We shall not be responsible and disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered by the user or any third party as a result of or which may be attributable, directly or indirectly, to the use of or reliance on any information or service provided. All files/information is provided 'as is' with no warranty or guarantee as to its reliability or accuracy. We do not recommend, promote, endorse or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed on the site by google adsense.
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