Saturday, February 19, 2011

Update for 21st February 2011


 Nifty Futures Again at the Crossroads !

  • Let's start this update with some performance data. The buy signal indicated by the Momentum Signal at the Nifty level of 5455 on 14th Feb. resulted in to a maximum favourable excursion ( MFE ) of 134 points. Or in other words, the trade would have lead to to a profit of 100 to 150 points, depending up on the entry and exit opportunities.
  • Now here are two quotes from the previous two updates which dealt with the resistance above and the market situation.
  • "If  Nifty future breaks above the high ( 5505 ) and reaches the next higher resistance area ( 5550 to 5600 ), it may attract profit booking and even some shorts." ( Update dated 17th Feb. )
  • "The market is due for a small correction, as it does not usually make gains continuously for more than six or seven days. ...The kind of one way movements being seen at present  can also turn a small reversal in to a  severe one." ( Edited quote from the Update dated 18th Feb. )
  • It seems that no more explanation is required to understand the market action of Friday, as the reasons behind the sell off is all in the above two quotes.
  • On Friday, markets opened higher and immediately went up, forcing even the last of the bears to cover up, and upon reaching the top end of the already indicated resistance, the sell off started. 

  Nifty Futures - Intra-day Chart  


     Nifty Futures  - Daily Chart 

  • Friday's sell off has lead to the formation of a bearish engulfing candle in the daily chart of Nifty futures. The candle has been able to cover the trading range of the previous two days.
  • However, the market is still in the bullish area of the charts and some of the upward momentum might be still be out there. 
  • Therefore, it seems that if the market is able to hold the 5400 level, it may recover and try to test the resistances above before deciding about the future direction by the time of budget.
  • However, it is equally plausible that the market may test the lower supports once again before trying to recover. ( It may be noted that the severity of Friday's sell off was caused by the local factors.)
  • And these local factors like more scams, bad politics, rising interest rates, a budget withdrawing some of the soaps extended to the industry etc may again pull down the markets at any time. 

  • Therefore, after a careful consideration of all these factors and the market's present position in the no man's land, this author is at a loss to guess the immediate next direction of the market. 
  • It is said that a trader can take any of the three positions in the market. Go long, Go short or simply Stay away. Not making any trade can also become a better trading position at some times !
  • Well, who wants to trade at the 50:50 situations ? Better watch the 50  over matches !!


Nifty Options Scene   
 
The February series Nifty Options Put Call ratio ( PCR )  decreased  to 1.05 on  Friday.  The India VIX index also closed higher at 24.18, gaining 7.13 %. Huge Put covering  (  decrease in open interest )  was  seen at the  5500 strike.  The highest  outstandings of February series Put options OI have remained unchanged at the 5400 strike. However, the 5300 strike also held very  high number  of Put OI, becoming  the strike with second highest Put OI. Significant call writing was seen at the two strike of 5500 and 5400 on Friday. The highest  open interest ( OI ) of February series Nifty Call options has  remained unchanged at the 5600 strike. However, the 5500 also added high open interest of Calls thereby becoming  the strike with the second highest Call OI.  This option OI data seems to suggest that the market participants are expecting the market to trade in a  range between 5300 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, 3.46 and  1.14 respectively as on  18th 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 lower at the +80  level on Friday.

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  21st 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 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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1 comment:

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