Thursday, February 3, 2011

Update for 3rd February 2011

Nifty Future Goes Nowhere !

  • Following the cues from the overnight rally on Wall Street and the resultant gains in the Asian markets, Nifty futures opened higher at 5491 on Wednesday.
  • Therefore, the expected opportunity for a quick contra-trend long trade didn't materialise at all on Wednesday.
  • Whenever the market opens away from the previous day's close and in the absence any significant price moving reasons, markets ( read traders ) have a tendency to test the the previous close.
  • As such,  Nifty futures sold off from the higher open and recorded an intra-day low coinciding with indicated support / reference level at 5450. 
  • Following five day's continuous losses, Nifty future was expected to close in the positive territory on Wednesday.
  • It seemed that Nifty future may close above the 5475 levels till around 2.30 PM.
  • However, the ghosts of the 2G scandal again visited the Dalal Street in the form of news reports of arrests made in the case.
  • The hopes of a respectable close after five days of continuous losses were taken away  by the ghosts and skeletons from the cupboards as the markets again sold off in the last hour of trading.
  • However, Nifty futures still closed with some meager gains, not belying all the hopes of a positive close.

Nifty Futures - Intra-day Chart   

   Nifty Futures  - Daily Chart 

  • Nifty futures closed at 5432 for the day, just 9 points higher than the previous close.
  • The Nifty contracts and the indices have formed inside day candles in the daily charts.
  • Inside day candles generally indicate two way trading due to the indecision by the market participants or a pause in the trend. 
  • As the market has already paused and closed with some gains for the day, the down trend may resume from here. It is also equally plausible that the market may try again for the expected bounce.
  • Since the market has tried to bounce for the past three trading sessions and failed and because of the fact that Nifty futures never reached the lower entry point before a bounce,  traders may postpone the contra-trend long trade till the contracts reach the lower support at 5200 to 5225 levels.
  • The lower supports are at 5225 and 5350 levels and the higher resistances are at 5550 and 5630. 
  • Traders may  use the 5450 level also as reference point.
  Nifty Options Scene  

The February series Nifty Options Put Call ratio ( PCR )  remained almost unchanged at a below normal  0.98 times on Wednesday. The India VIX  closed slightly lower at 23.53, down 0.11 %.  Significant additions to the Call option OI ( or call writing )  were seen at the strikes at 5500, 5600 and 5700, whereas Call OI decreased at the strikes above 5800. The highest  open interest ( OI ) of February series Nifty Call options has remained unchanged at the 5500 strike. The highest  February series Put options OI was at the 5400 strike as on  Wednesday.  Some additions to Put OI were also seen at the strikes between 4900 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 PE multiple of Nifty index has closed below the 21 mark for the second day after a long period.  The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 20.80,  3.43 and  1.15  respectively as on  2nd February 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 fifth 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  3rd 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 !!!

To access and/or download  the free online Position Limit Calculator click here.

To checkout the five year history of The Momentum Signal Spreadsheet click here

© 2010-2011, All rights reserved.

Disclaimer: No research, information or content contained herein or in the accompanied spreadsheet shall be construed as advice and is offered for information and educational purposes only. We shall not be responsible and disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered by the user or any third party as a result of or which may be attributable, directly or indirectly, to the use of or reliance on any information or service provided. All files/information is provided 'as is' with no warranty or guarantee as to its reliability or accuracy. We do not recommend, promote, endorse or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed on the site by Google adsense.

No comments: