Thursday, February 17, 2011

Update for 17th February 2011

 A Day of Sideways Trading, Now What ?

  • Nifty futures opened slightly higher at 5481 on Wednesday. 
  • Wednesday's trading was of the sideways nature with some moderate gains at the end.
  • The trading range for the day became narrower and was confined between the close of 14the Feb. and the high of the previous day.
  • The technical position of the market did not undergo any change on Wednesday.
  Nifty Futures - Intra-day Chart    

      Nifty Futures  - Daily Chart


  • Tuesday's doji like candle and Wednesday's narrow range trading might be indicating indecision by the market or even a reversal. However, it is still beyond the power of any guess to find whether the volatility compression is a sign of a reversal or further upsides.
  • Nifty future and the two indices, Nifty and Sensex have gained in the past four trading days. It is, therefore,  natural for the futures contract and the indices to close with some losses in the next one or two trading days.
  • If  Nifty future breaks above the high and reaches the next higher resistance area ( 5550 to 5600 ) on Thursday, it may attract profit booking and even some shorts.
  • In case the Nifty contracts breaks the low of Wednesday, it may revisit the 5400 area. 
  • All previously disseminated reference, support and resistances  levels are still valid for valid intra-day analysis and trading.
  • The option open interest data seems to suggest that the 5300 and 5400 strikes are becoming strong supports for the time being.
Nifty Options Scene   
The February series Nifty Options Put Call ratio ( PCR )  improved further to 1.12 on  Wednesday.  The India VIX index also closed higher at 23.05, gaining  0.88 %. Significant Put writing  ( increase in open interest )  was seen at the  strikes at  5400 and 5500.  The  5200 and 5500 strikes also added some Put options OI. The highest  outstandings of February series Put options OI has remained unchanged at the 5400 strike. However, the 5300 strike also held very  high number  of Put OI, becoming a closed second.  The highest  open interest ( OI ) of February series Nifty Call options has  remained unchanged at the 5600 strike. However, the Call OI at 5500 strike has also reached very near to that of 5600 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 20.95, 3.47 and  1.13 respectively as on  16th 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 closed at the +100  level for the second 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  17th 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 !!!

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