Tuesday, February 8, 2011

Update for 8th February 2011

 Another Inside Day Candle, Some Upside in Sight ?

  • Nifty futures opened slightly higher at 5400 on Monday.
  • After testing the previous day's last traded price of 5382 in the morning session, Nifty futures was stuck in a very narrow and flat trading range between 5390 and 5410, till around the 2.00 PM mark.
  • Traders may note that the top end of this tight trading range remained just below  or around the contract's previously recorded swing lows of 5411, 5422 and 5425.
  • An upward breakout in the afternoon session above the then day's high saw the Nifty contracts reaching a high of 5445. This high was just below the reference level of 5450.
  • However, a correction from this minor resistance level attracted a sudden bout of selling, especially once the contract broke below the morning session's high of 5420. Nifty futures fell steeply and recorded the day's low of  5370. 
  • Nifty futures recovered from the lows at the fag end of the day and closed at 5405.
 Nifty Futures - Intra-day Chart     

    Nifty Futures  - Daily Chart 

  • Day long sideways trading in the Nifty contracts has lead to the formation of an inside day candle in the daily chart. ( See the close up chart on the left ).
  • The previous candle engulfed the trading range of four trading days and some more fall in the contract was normally expected.
  • Formation of the inside day candle after a normally bearish candle may be indicating support at the levels or a reversal for the time being.
  • As such, traders may look out for some recovery in the market on Tuesday. The minor resistance above the present close is at 5450 and the next is at 5550.
  • Some moderation in the implied volatility at the fag end of the day, especially when the market fell, might also be indicating some upside from the 5350 - 5400 level.
  • However, as no confirmation showing the end of the present downtrend is available yet, traders may expect some sudden down drifts or even the resumption of the trend at any time or later on.
  Nifty Options Scene  

The February series Nifty Options Put Call ratio ( PCR )  improved to 1.00 on Friday.  Though the market traded flat, the India VIX  closed higher at 24.69, up 1.15 %.  The India VIX was seen declining towards end of the day after hovering above the 25 mark during the morning session. Significant Put writing  ( increase in open interest )  was seen at the strikes at 5100, 5300 and 5400.  Some Call writing was also seen  at strikes at 5400, 5700 and 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  Monday.  This option OI data seems to suggest that market participants are expecting the market to trade in a wide range between 5100 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 PE multiple of Nifty index remained below the 21 mark on Monday.  The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 20.69,  3.41 and  1.15  respectively as on  7th 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 again closed at -100 area for the day.

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  8th 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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