Thursday, February 24, 2011

Update for 24th February 2011



  The Derivative Expiry is Here !

  • Following the negative cues from the international markets due to the Arab world unrest and the galloping crude oil prices,  Nifty futures opened slightly lower on Wednesday.
  • We had indicated in the last post that Nifty future is trading in the no-man's-land and a failure to test the upper resistances may force it to test the lower supports.
  • It was also indicated that the open interest data of February series Nifty options is placed in such a manner that the preferred expiry area as far as the options writers are concerned is between the 5400 and 5500 strikes.
  • And it seems that the trading range of Wednesday has remained inside( or rather kept ) the indicated preferred range of the options sellers. However, it is too early to say that the expiry may happen in the the 5400 - 5500 range due to the worsening macro-economic factors due to the rising crude prices.
   Nifty Futures - Intra-day Chart    



      Nifty Futures  - Daily Chart 



  • The rising crude oil prices may hamper the the post bear market growth story across the world. As far the Indian economy is concerned, it may adversely affect all or most of the factors like current account deficit, exchange rate, administered subsidies,  fiscal deficit, general price levels, inflation, interest rates, GDP growth etc.
  • Therefore, another retest of the recent lows or even a break of the lows are becoming more of a probable scenario.
  • Even if the option writers manage an expiry between the 5400 and 5500 strikes Thursday, Nifty futures may move out of the present trading range on Friday barring totally unexpected circumstances.
  • Nifty futures, Nifty and BSE Sensex have already closed in the neutral momentum area as on Wednesday in accordance with the Momentum Signal system. 
Nifty Options Scene   

The February series Nifty Options Put Call ratio ( PCR )  decreased  to 1.01 on  Wednesday. The India VIX index also closed slightly lower at 26.55, losing 1.12 %. Some Put covering  (  decrease in open interest )  was  seen at the  5600 and 5500 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 The highest  open interest ( OI ) of February series Nifty Call options has  remained unchanged at the 5600 strike. However, the 5500 also held 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
 
 
  • No significant changes have happened  to the options pain chart in Wednesday's trading. As stated elsewhere, the area between 5400 and 5500 remains as the most preferred area for the expiry for the option writers.

 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 20.82, 3.44 and  1.14 respectively as on  23rd 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 in respect of Nifty, BSE Sensex and Nifty futures have closed with +20 value indicating netral 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  24th 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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