Tuesday, February 1, 2011

Update for 1st February 2011

    Nifty Futures Bounces from Lows, But What Now ?

  • The sell signal indicated by the Momentum Signal at 5630 in the current month Nifty futures on last Thursday has lead to a favourable excursion of 190 points or profits.
  • As indicated in the previous post, Nifty futures bounced from the 5450 minor support area.
  • In tandem with the SGX Nifty contracts, Nifty futures opened lower on Monday with a gap.
  • A large gap like 60 points from the last traded price may force the market to recover and fill the gap.
  • Therefore, some bouts of short covering occurred during the day. 
  • The last two day's intra-day recoveries have almost the same highs at 5545.
  • The level of 5550 was the starting point for the upward breakout towards the all time highs in September.
Nifty Futures - Intra-day Chart 

  • Therefore, the level of 5550 may become a reference level for the purpose of intra-day analysis and trading.
  • The higher resistance above 5550 is at 5630 coinciding with the 200 DMA.

  Nifty Futures  - Daily Chart     

  • As pointed out in the previous posts, even if the Nifty contracts crosses the 200 DMA at 5630, it may encounter resistances at the 5700 and 5775 levels.
  • The lower supports are at 5350 and 5200 levels.
  • The chances of Nifty futures resuming the downtrend again or at least making a revisit of the present lows are very high even if a recovery happens in the next few days.
  • The medium term trend remains downward and this view is seemingly supported by the new bouts of selling and weakness seen in the hitherto strong stocks on Monday.
  • Monday's losses were mainly accounted by the better stocks like ITC, HDFC, TCS, Infosys etc.
  Nifty Options Scene  

The February series Nifty options Put Call ratio ( PCR )  decreased to 1.13 times on Monday. However, following the sell off in the market, the India VIX  closed higher at 23.41, up  3.68 %.  The highest numbers of February series Nifty Call option open interest  ( OI ) were at the 5800  and 5700 strikes. The highest  February series Put options OI was at the 5400 strike as on  Monday. Significant additions to the Call option OI were seen at the strikes at 5500 and upwards till 6000. Similarly, Put OI also increased at strikes between 5100 and 5500. This option OI data seems to suggest that market participants are expecting the market to trade in a wide range between 5200 and 5800 in the immediate future. However, these indications may change in accordance with the changes in the market at any time before the expiry. 

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 21.06,  3.47 and  1.13  respectively as on  31st January 2011.  Readers may please note that some decrease in the PE multiple is possible at present, due to the increasing profits figures being reported by the corporates in the quarterly results season. ( 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 :

Momentum Signal has again closed at -100 area for the third day in running indicating negative momentum.

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  1st 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 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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