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Tuesday, February 15, 2011

Update for 15th February 2011




Is This Still a Bounce or a Reversal ?

  • Nifty Future opened some 30 points higher on Monday, following the positive bounce on Friday.
  • The day's low remained at 5336, leaving a small gap of 6 points between the  trading ranges of Friday and Monday.
  • Nifty futures rallied above the minor resistance level of 5350 and rallied strongly for the entire trading session.
  • Though the 4400 - 4410 level was expected to be a minor resistances, being the intersection point of the falling trend line applicable to the last leg of the fall, the Nifty contracts didn't encounter any resistance at the level.
  • Nifty futures spent some time trading in a range between 5420 and 5440 before rallying to a high of 5468 before closing for the day at 5455.
    Nifty Futures - Intra-day Chart  




    Nifty Futures  - Daily Chart 

  • Nifty future has already rallied 292 points in less than two day's of trading. And this rally has happened just when most analysts were predicting that Nifty may reach 4800 or below.   This rally again proves that too much of consensus always turns a market in to very a dangerous place. ( However, this rally has not yet ruled out another leg of the down trend later on. )
  • Readers may please note that this blog has been writing for some time that the market may bounce from the 5225 or 5125 area  before deciding the next direction. 
  • The Momentum Signal system has indicated a buy as on the close of trading on Monday. However, since the Nifty contracts have already gained so much in such a short time, the rally may slow down or even test the supports below before trying to test the higher resistances. Therefore, lower position limits would be more ideal for the present buy signal.
  • Higher resistances are at 5565, 5635 and 5795.
 Nifty Futures - Moving Averages Chart


  • The above chart shows the various simple daily moving averages ( DMAs ) of Nifty futures.
  • The 10,20,50,100 and 200 DMAs of Nifty futures are present at 5378, 5520, 5788, 5935 and 5637.
  • Therefore, the 20, 200 and 50 DMAs may also act as resistances for the time being.
  • The option open interest data also seems to suggest that the 200 DMA at 5637 may act as a strong resistance for the time being.
  • Therefore, the chances of a retest of the lower boundary of the old trading channel may still remain open, even if the present rally continues and later on,  fails at any of the resistances mentioned above. Please click here to read the previous post showing the weekly chart of Nifty index. ( However, this will be subject to the budget and all other factors which may come to fore from time to time. )
Nifty Options Scene   
 
The February series Nifty Options Put Call ratio ( PCR )  improved almost to the par at 0.98 on Monday.  The VIX index also closed lower at 22.58, losing 3.79 %. Significant Put writing  ( increase in open interest )  was seen at the  strikes at 5300, 5400 and 5500. Significant Call writing was also seen  at the strike at 5600 where as covering of call options were seen at the strikes at 5200 and 5300. The highest  open interest ( OI ) of February series Nifty Call options has moved upwards  to the 5400 strike following the covering at the lower strikes. The highest  outstanding of February series Put options OI has also moved upwards to the strike at 5400.   This option OI data seems to suggest that market participants are expecting the market to trade in a  range between 5400 and 5600  in the near term.  However, these indications may change any time before the expiry in accordance with the changes in the market.
 
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 20.86, 3.45 and  1.14 respectively as on  14th February 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 moved in to the buy territory as on Monday by indicating a value of +50.


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  15th February, 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 note the specific Risk Factor No 4 which might be applicable to the present situation. 

Readers are also requested to go through The Signal, Entries and Exits, Position Limits, Risk Factors, Risk Analysis,  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 !!!

To access and/or download  the free online Position Limit Calculator click here.
 
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