Friday, February 4, 2011

Update for 4th February 2011

 At Last the Bounce Happens, But What Now ?

  • Nifty futures opened on Thursday exactly where it closed on Wednesday.
  • After the open at 5432, the Nifty futures contracts traded between 5425 and the reference level of  5450 for a short time.
  • But once the Nifty contracts crossed the reference level of 5450 on the third test, the contracts rallied strongly towards the previous day's high of 5510.
  • But the previous day's high was only a minor obstacle in the path of the Nifty contracts as it rallied further for a test of 5450. 
  • The Nifty contracts traded in a tight range between the previous day's high and the day's high of 5545 for the rest of the day and finally closed at 5539.
Nifty Futures - Intra-day Chart    

   Nifty Futures  - Daily Chart 

  • Though the bounce was expected, it actually came a day later than expected.
  • The day long strong rally has lead to a strong green candle in the daily chart of Nifty futures.
  • Nifty future has closed just below 5545 - 5550 resistance level which is also the four day high now.
  • Though some follow up buying may help the futures contracts to break above 5550 level, whether it will be capable of rallying above the 200 DMA at 5635 and test the 5775 - 5800 area is anybody's guess.
  • The higher resistances are at 5635 and 5775 levels at present.
  • The lower supports are at 5450 and 5350.
  • The option market data ( which follows ) also seems to indicate that the market may have some more upside. 
  • However, the chances of the Nifty contracts revisiting the lower boundary of the old trading channel ( at around the 5200 to 5300 levels ) in the medium term still remain valid as of now.

  Nifty Options Scene 

Following the rally, the February series Nifty Options Put Call ratio ( PCR )  improved to a  better level of 1.10 times on Thursday. The India VIX  closed lower at 22.69, down 3.53 %.  Significant covering of short  Call options  ( decrease in open interest )  was seen at the strikes at 5500, whereas Call OI increased at the strikes at 5700. The highest  open interest ( OI ) of February series Nifty Call options has moved upwards  to the 5500 strike. The highest  February series Put options OI was at the 5400 strike as on  Wednesday.  Significant additions to Put OI were also seen at the strikes between 5400 and 5500. This option OI data seems to suggest that market participants are expecting the market to trade in a wide range between 5400 and 5700 in the near term. Therefore, Nifty future may try to move higher to test the 5635 resistance or even higher in the immediate future. However, these indications may change in accordance with the changes in the market, any time before the expiry. 

Nifty Trailing Fundamentals     

The trailing PE multiple of Nifty index has again moved above the 21 mark.  The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 21.16,  3.49 and  1.13  respectively as on  3rd 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 :
Momentum Signal has closed at -80 area for the day after remaining in the maximum negative momentum area for five trading days.

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  4th 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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1 comment:

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