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Wednesday, January 5, 2011

Update for 5th January 2011

    Banks Spoil The New Year Party !!!

On the second trading day of the new year, Nifty futures opened slightly higher on Tuesday, when almost all international stock indices were trading with gains. We had indicated in the last post that the unusually low volumes seen on Monday, might be raising some questions about the  strength  of the present uptrend. It was also indicated in one of the previous posts that the rising interest rates may affect the banking sector and the Indian economy as whole. It seems that, these two factors were seen in action in Tuesday's trade, as Nifty futures started to correct right from the beginning of trade. Nifty futures recorded the day's low of 6147 by the 11.30 AM mark. A recovery in tandem with the gains in the FTSE index ( which did not trade on Monday when all other markets gained ) saw the futures reaching a new swing high of 6210. However, the contract was again sold off on the back of the all round weakness in the banking sector. Nifty futures closed at 6159 for the day.


Nifty Futures - Intra-day Chart     



Nifty Futures  - Daily Chart 



The daily chart shows the two red candles formed in respect of the last two trading days. The pattern of a small bodied red candle followed by another red one with a lower close and a  similar or  higher  high might be indicating a reversal for the time being. However, this reversal pattern requires further confirmation as of now, because this market action could have happened just because of the market gaining in the previous four days and as a normal correction on the fifth day. As long as the Nifty future stays above the 6090 levels, it might still be trading in the bullish area. The important reference points as indicated in the two previous posts still  remain valid. However,any  further weakness in the banking sector may cause a break down in the chart of the banking major SBI, which in turn may affect the present day rally as a whole.

  Nifty Options Scene

The January series Nifty options Put Call ratio ended  at a slightly lower level of 1.56 times as on  4th January 2011. The highest open interest ( OI ) of Put options is at the 6000 strike. The highest number of Nifty Call option OI is at the 6300 strike. The second highest Call OI is at 6200.  There were additions to the Call option OI from 6200 towards higher levels, mainly centered at the strikes of 6200,6300,6400, 6700 and 6800. Similar additions of Put OI was also seen from the 6200 strike level to lower  levels. These were centered at the 6200, 6000, 5900 and 5700 strikes. The Nifty option OI seem to be suggesting a range bound market between the range from 6000 to 6300 with slight positive bias. The India VIX closed at 17.04. 

Nifty January Option Pain Chart 


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 24.53,  3.87 and  1.01  respectively as on  4th 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 :


Nifty futures and both the indices, viz. S&P Nifty and BSE Sensex have closed with Momentum Signal values of +100 as on Tuesday's close..


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  5th 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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