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Wednesday, February 16, 2011

Update for 16th February 2011




 Markets Still at the Cross Roads !

  • Tuesday's trading action was very simple. Nifty futures opened flat at 5456. Trading remained in the narrow trading range between 5420 and 5460 of the late session of the previous day for a short time.
  • Nifty futures tested the low of the trading range and reached 5397 in the morning session.
  • The Nifty contracts recovered fast and recorded the then day's high at 5490. Later on, trading remained mostly above the previous day's high of 5467.
  • In the last half an hour of trading saw some profit booking and Nifty futures corrected to close on 5476 with a gain some 20 points for the day.
  • Trading on Tuesday was mainly centered around the reference level of  4450.
   Nifty Futures - Intra-day Chart   



     Nifty Futures  - Daily Chart 

  • Tuesday's trading has lead to the formation of short bodied candles with long legs in the daily charts of Nifty futures and the Nifty index. The candle in the BSE Sensex however has been a perfect doji. 
  • The formation of doji or similar candles after a sudden move indicates the waning of momentum or even a reversal. 
  • Nifty future may still encounter stiff resistance at the 5550 to 5600 area. All previously indicated reference, resistances and supports levels are still valid in the short term.
Nifty Options Scene   
 
The February series Nifty Options Put Call ratio ( PCR )  improved further to  1.04 on  Tuesday..  The VIX index also closed higher at 22.85, gaining  1.20 %. Significant Put writing  ( increase in open interest )  was seen at the  strikes at  5400 and 5500. Significant Call writing was also seen  at the strikes at 5500  and 5600 whereas some more 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 5600 strike following the covering at the lower strikes. However, the Call OI at 5500 strike also remained very near to that of 5600 strike. The highest  outstanding of February series Put options OI has remained unchanged at the 5400 strike. 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 20.85, 3.47 and  1.13 respectively as on  15th 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 upwards to close at +100 on Tuesday.



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  16th 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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2 comments:

Anonymous said...

Have been following your blog since a few days & have enjoyed the balanced commentary. Your momentum signal though seems to be giving optimistic signals.

momentumsignal said...

Thank you for your comment. I would say, Momentum Signal is a bit late in fast moving markets and therefore, it may lead to whipsaws also. Please read the Risk Factors where some of the deficiencies of the Signal are given.