Wednesday, February 23, 2011

Update for 23rd February 2011

 Nifty is Still in the No Man's land ?

  • Nifty futures opened lower on Tuesday due to the all round losses in Asian markets on the back of the rising crude prices . 
  • Nifty contracts recorded an intraday low of 4456 in the morning session before trying to test the previous day's last traded price / closing price. 
  • However, this test ended at 5520 thereby leaving a subtle gap between Tuesday's high and Monday's last traded price / closing price. 
  • These subtle gaps, especially when such gaps occur near the top of intermediate rallies, may indicate weakness on the following days. ( However, such gaps might not have much effects in a sideways moving market. )
  • Nifty futures recorded a fresh intraday low of 5428 in the afternoon session before recovering to close at 5476. 
   Nifty Futures - Intra-day Chart   

      Nifty Futures  - Daily Chart 

  • Tuesday's trading has lead to the formation of another inside day candle with a comparatively normal trading range.
  • Nifty futures have been trading around the trading range between 5450 and 5500 for the past six trading days. The outer boundaries of this trading range have been 5400 and 5550. 
  • The open interest data of February series Nifty options also has been pointing towards this area as the area of least option pain for the option sellers. ( Please see the chart etc. given below. )
  • However, it seems that the chances of the market moving out of this range is increasing day by day and may happen in the next three trading days or so. 
  • The present position of the market is like this. There has been some positive momentum in the past one and a half week or so. But the market is finding it difficult to breakout above the supply zone between 5550 to 5600 area in the Nifty. Therefore, it is natural that the market may again test the supports if it fails to break the resistances. 
  • The rising crude oil prices, all round losses in foreign markets and the subtle gap of Tuesday may increase the probability of a test of the supports or even a break of the immediate supports.  
Nifty Options Scene   
The February series Nifty Options Put Call ratio ( PCR )  decreased  to 1.04 on  Friday.  The India VIX index also closed higher at 26.85, gaining 7.79 %. Some Put covering  (  decrease in open interest )  was  seen at the  5500 and various lower strikes.  The 5400 strike still remains as the strike with the highest  outstandings of February series Put options. However, the 5300 strike also held very  high number  of Put OI, becoming  the strike with the second highest Put OI. Significant call writing was seen at the 5500 strike on Tuesday. 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 5500  in the near term.  However, these indications may change any time before the expiry, in accordance with the changes in the market.
Nifty Option Pain Chart - February Series

  • The Feb. series option pain chart also indicate that the range between 5400 and 5500 remains as the most favorable expiry area as far as the option writers ( sellers ) are concerned.
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 20.90, 3.46 and  1.14 respectively as on  22nd 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 :

Nifty futures and the BSE Sensex ended with Momentum Signal values of +80 as on Tuesday. However, the Nifty index closed in the neutral momentum area with a Momentum Signal value of +20.

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  23rd 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 !!!

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