Thursday, March 31, 2011

Update for 31st March 2011



  Another Late Edition of the Momentum Signal Trading System

  • This late edition of the Momentum Signal trading system is published at a time when the Nifty future has almost reached even the second medium term target for the breakout as discussed in the post dated 28th March 2011. The inconvenience caused by the late publishing is regretted. This edition also contains only the bare essentials of the trading system. 
  • As the market has  gained continuously for seven trading days already, traders may exercise some caution in respect of the frontline stocks and the Nifty index. Nifty index and the futures may find some resistance around the 5850 levels.
   Nifty Futures - Intra-day Chart


 Nifty Futures  - Daily Chart 


Wednesday, March 30, 2011

Update for 30th March 2011



   A Belated Update of the Momentum Signal Trading System

Due to a massive power outage from yesterday morning which continues even now and the consequent system failure, this update is published late and contains only the basics of the system. The inconvenience caused to the regular readers is regretted.   

   Nifty Futures - Intra-day Chart


 Nifty Futures  - Daily Chart 


Tuesday, March 29, 2011

Update for 29th March 2011



   Nifty Futures Poised at the 200 DMA !


  • Nifty futures opened flat on Monday morning and moved upwards with the help of it's positive momentum  retained form the previous week.
  • As pointed out in the previous post, Nifty future has already reached the 200 DMA at the 5700 levels. As indicated in the previous post, some more profit booking may come in to the market at these levels. 
  • Moreover, the market has already made strong gains continuously for the past five trading sessions. It is not very common for the major stock indices to make straight gains for more than five to six trading days.
  • These two factors may now lead to some kind of a consolidation or a mild correction happening in the market. 
  • However, the market remains in a 'buy on decline mode' as of now due to the presence of the recent positive momentum. 
   Nifty Futures - Intra-day Chart



Nifty Futures  - Daily Chart 

Monday, March 28, 2011

Update for 28th March 2011



  Finally, the Breakout Happens !

  • The last abbreviated post was titled "   Indices Again  in the Positive Momentum Territory ! "  due to a new buy signal obtained from the Momentum Signal trading system on Thursday.
  • However, it was not known whether the buy signal may lead to a breakout or not  due to the primarily sideways kind of trading being seen in the past few weeks.
  • Friday's market action has now confirmed the breakout. The market has been showing some other subtle indications also pointing towards a breakout to the upper resistances.
  • The first of these indications was the reversal from the support at 5350. The second was a a subtle gap which occurred on Thursday. ( Subtle gap - Nifty futures never traded at the Wednesday's last traded price and the high on Thursday thereby leaving small gaps. )  The third and most important one was the close of Nifty futures above the the 50 day moving average after a long period of two and a half months. 
  • Therefore, all these technical signals have lead to new FII buying on Friday and this has helped the market to surpass the higher resistances between 5600 and 5650 levels very easily. 
   Nifty Futures - Intra-day Chart



Nifty Futures  - Daily Chart 


Friday, March 25, 2011

Update for 25th March 2011


  Indices Again  in the Positive Momentum Territory !


  • This update is limited to just the bare basic minimum due to some exigencies. Please bear with the author.
  Nifty Futures - Intra-day Chart



Nifty Futures  - Daily Chart 



Thursday, March 24, 2011

Update for 24th March 2011



 Warren Buffet Effect In Action ?


  • On Wednesday, the basic cues for the market were generally negative and at the best, the indications were towards a sideways market. Crude prices had moved up in the night. The market was poised to open slightly lower too !     
  • Nifty Futures opened slightly lower as expected on Wednesday. However, a small rally from the gap down open towards the highs of the previous day ( near the resistance at 4450 ) turned out to be a strong one to cross the resistance. Nifty futures closed near the highs of the day. Indian Rupee also rallied on Wednesday in tandem with the gains in the stock market.
  • May be the presence of the world's best stock picker and investor, Warren Buffet's presence in India might have helped. May be some of the perceived lack of trading interest and volumes near the 5350 area too helped. ( Please note that this scenario of market not breaking the 5350 support and a subsequent rally or a test of the resistances was also indicated in the previous posts. )
  • As this author had been writing for some times, most analysis and systems suitable for the trending markets are useless in the generally sideways kind of market being seen now a days.  As such, it is very difficult even to guess whether any follow up buying will be seen in the next few days or if or when a breakout may happen and it's direction.
  • Therefore, no further market commentaries are included in this post barring the usual charts etc.

  Nifty Futures - Intra-day Chart



Nifty Futures  - Daily Chart 

Wednesday, March 23, 2011

Update for 23rd March 2011


 Nifty Future Poised Just Below the 5450 Resistance !

There has not been much happening in the stock markets off recently. Major indices and stocks are mostly trading sideways now a days. There are many reasons for this phase. Here are some of the reasons ! Stocks went northwards in to the realms of expensive valuations in the last quarter of the  previous year. Some of the stratospheric valuations have been corrected. The pivotal Stocks are neither cheap nor very expensive at present but most of them are retaining the bull market valuations still.  For example, the Nifty trailing Price Earnings Ratio, ( PE Ratio ) has corrected from the near 26 times levels to the 20 - 21 levels at present.  The so called mid and small caps have almost seen  a bear market by now. Now the uncertainty is about the adverse impact from the rising interest rates and inflation on the corporate profit growth. The small and midcaps are the first ones to fall in the face of any adversity. Now what is the future course ? Markets need conviction about the  resumption of unhindered profit growth of around 20 to 25 %. But no such triggers are seen available at present. Therefore, stocks are spending time, trading mostly in a sideways range, waiting for triggers. Until more clarity arrives or valuations become cheaper, stocks may behave like this.  No amount of analysis, neither technical nor fundamental, can be of much use in situations like these.

As there is no change in the technical position of the market for the reasons described above, this post is limited to just the usual charts, data and trading system updates. Please read the previous posts for supports and resistance levels.
  Nifty Futures - Intra-day Chart



Tuesday, March 22, 2011

Update for 22nd March 2011


  Nifty Future Poised Above the 5350 Support !


  • In the last post we said that the battle for the 5400 strike ( of Nifty Put Options ) is on and the result  of the battle is yet to be known.
  • However, Monday's ranged trading has not yet  lead to the resolution of the said battle. Yeah, the battle for the 5400 strike is still on.
  • Nifty futures opened slightly higher on Monday. It sold off towards the previously indicated lower support of 5350 in the morning session. The recovery from the low of 5357 ended at 5425, amid all round positive gains being recorded by stocks in all the major markets. Nifty futures finally closed lower at 5387.
  • The rising crude oil prices, worsening politics etc. seem to have started to affect the market negatively at present. It seems that the gains in the other major stock markets on Monday has helped Nifty futures to hang on to the 5350 support. 
  • The technical position of the market has not changed at all on Monday. Therefore, all supports ( 5350 & 5200 ) and resistances ( 5450, 5500 & 5550 ) as well as the different market scenarios discussed in the previous post(s) still remain valid as of now. 
  • As a matter of abundant caution, it may be noted that most of analysis and systems may fail if the market remains in a trading range. As such, if the Nifty contracts are not breaking the 5350 support, it may lead to a covering rally towards that  upper resistances.
  Nifty Futures - Intra-day Chart



    Nifty Futures  - Daily Chart 

Sunday, March 20, 2011

Update for 21st March 2011


 Battle for the 5400 Strike is On !

  • Here is a quote from the last post " Market has been spooking the bulls and bears alike for some times now. Now the only question remaining to be answered is whether the market is going to spook the straddle and strangle option writers in the current month or not ? Any breakout by the Nifty either way may lead to a scramble for covering by the option writers ! "
  • We wrote this comment after the indication of a new sell signal by the Momentum Signal system on Thursday, in a market which seemed to be predominantly flat till then.
  • The market heavyweight stock Reliance provided the ammunition for the sell off on Friday.
  • Friday's sell off has forced some of the Put options writers to cover their open Put option positions for the  5400, 5600 and 5500 strikes.
  • However, the battle for the 5400 strike is still on as the Nifty future is still inside the broad trading range of 5350 and 5550.
  Nifty Futures - Intra-day Chart



    Nifty Futures  - Daily Chart 


Friday, March 18, 2011

Update for 18th March 2011



 Nifty Futures Still Stuck in the Trading Range !

  • Yeah, there is nothing more to write about except that Nifty future is still stuck in the trading range and that Indian stock market has seemingly attained some kind of resilience. But for how long ? No one knows !
  • Following the huge losses in Europe and U S markets overnight, Nifty futures closed lower on Thursday. Many highly oversold stocks gained whereas some of the better stocks lost on Thursday.
  • The technical position of the market remains more or less the same and therefore, it seems that no more comments are required ! ( Who wants to read the so called same old market commentaries repeatedly till the market does something interesting ? )
  • Market has been spooking the bulls and bears alike for some times now. Now the only question remaining to be answered is whether the market is going to spook the straddle and strangle option writers in the current month or not ? Any breakout by the Nifty either way may lead to a scramble for covering by the option writers !
  Nifty Futures - Intra-day Chart

Thursday, March 17, 2011

Update for 17th March 2011



Can Indian Stock Markets Become a Safe Haven ?


  • Indian stock markets continued with the positive momentum of the previous day on Wednesday. Nifty futures opened slightly higher at 5477 and rallied to 5553 before settling for the day at 5529.
  • However, Nifty future has not yet broken out of the trading range between 5350 and 5550.
  • Though the general feeling or feedback being obtained from the screen and the charts  is pointing towards  a test of the upper resistances, the increasing uncertainty in Japan and elsewhere in the middle east may affect the positive indications at any time.
  • European and U S stocks are plunging at the time of this post. Now the pertinent question is whether the Indian stock markets can become an isolated safe haven in the face of all round turbulence ?
  • Even as the options markets ( March series ) are suggesting strong support for Nifty at around the 5400 strike, this author is forced to answer the above question negatively.
  • Experience says that no market can remain isolated for long times and sooner or later all markets will be affected in panic situations. Experience also shows that the best stocks and markets also recover fast at the first sign of recoveries. 
  • Now here are some quotes from the previous post which might be still relevant :
  • "The triggers for the start of a downtrend is also rising in accordance with the Momentum Signal system. Moreover as has been observed  sometimes in the past, markets have a propensity to revisit the panic lows. Therefore, a revisit of the lower supports can not be ruled out even if the market gains on Wednesday on a rebound. "
  • "... in case of any breakout happening in the market ,especially towards the lower side, that might force the option writers running for cover. This might aggravate the condition of the market as seen on the last derivative expiry day."  
  •      

  Nifty Futures - Intra-day Chart



Wednesday, March 16, 2011

Update for 16th March 2011


Reliance Saves the Day, But What Next ?

  • In the previous post we had stated that Nifty future may still reverse from the swing highs as the contracts had been trading range bound manner for some times. We showed that the 14 Day ADX index and the open interest data of Nifty march series option contracts were also supporting this scenario.
  • Therefore, irrespective of the Japanese tragedy, there was a real  possibility of the Nifty futures reversing from the resistances and retesting the lower boundaries of the old trading channel.
  • Nifty futures opened deep in the red at 5390 on Tuesday. After recording a low of 5375 in the morning session, the contracts recovered to a high of 5505 before closing at 5461 on Tuesday.
  • The actual credit for the extraordinary resilience shown by the Indian stock market on Tuesday goes to the market heavyweight stock Reliance, which gained 1.73 %.
  • Other factors which might have helped the market in containing the losses on Tuesday are the perceived support from the writers of huge Put option positions at the 5400 and 5300 strikes and the absence of huge leveraged weak long positions, which might have been cleaned out in the previous settlement.  
  • Now a general comment on huge gap down openings. This trading tip is given only as a general comment and may not become correct at all times. Generally speaking, if a market which has been experiencing positive momentum till the previous day makes a huge gap down opening, it has a better tendency to trade higher for some times or even resume the previous uptrend.
  • The above observation is valid in the opposite situations of huge gap up openings happening in weak markets. However, as a matter of abundant caution, it may also be noted that this general observation may fail in cases where the market reverses the earlier trend and starts an opposite trend.
  • As Nifty future has again closed right in the middle of the trading range between 5350 and 5550, it can move either way before breaking out either way. 

  Nifty Futures - Intra-day Chart



    Nifty Futures  - Daily Chart 

Tuesday, March 15, 2011

Update for 15th March 2011



   Will Nifty Futures Breakout and Start Trending !


  • In the last post it was indicated that Nifty futures can move either way as the contract was trading in a technically neutral area. 
  • Nifty futures rallied strongly on Monday and closed near the day's high at 5556. On the previous two occasions when Nifty contracts traded above the reference level of 5550 recently,  it retreated from the swing highs of 5589 and 5611 respectively. 
  • The Nifty contracts have been trading mostly in a sideways manner for some time and therefore, it is equally plausible that the contracts may correct from the previous swing highs.
  • Now the important question before traders is whether Nifty futures will be able to surpass the swing highs and  test the 200 DMA at 5680. 
  • Even if the contracts are able to move above the 200 DMA, the 5800 area may act as a strong resistance as of now being the upper boundary of the old trading channel. 
  Nifty Futures - Intra-day Chart



   Nifty Futures  - Daily Chart 


Monday, March 14, 2011

Update for 14th March 2011


   Nifty Futures Still in Neutral Territory !



  • Although Nifty futures have made losses in the last two days of the week, the contract never breached the 5400 support area. 
  • Friday's trading has again lead to the formation of another doji candle indicating indecision by the market participants.
  • The contract is still trading in a technically neutral area from where it can move either way.
  • The market may even keep on trading in a trading range for some more time as envisaged in many previous posts, before trying to breakout either way. ( Please see the shaded area as being the previously indicated preferred trading area and pointed out in many previous posts.)
  • As far as the market and Nifty futures are trading in a trading range,  most analysis would go awry and would be of no use.
  • As such, this author is forced to make no further market commentaries in this post. However all the usual charts, data and trading system updates are appended.  
  Nifty Futures - Intra-day Chart



Friday, March 11, 2011

Update for 11th March 2011

     Another Narrow Range Low Volume Day, But What Next ?



  • Nifty futures opened lower on Thursday and directionless trading was seen for the entire session. Volumes also remained comparatively lower.
  • There were just two outcomes after the completion of the session. First, Nifty futures closed with some losses for the day. Second, another subtle gap has been left in the charts as the previous day's last traded price ( 5532 ) and the official close price ( 5542 ) were not reached by the contracts on Thursday.  
  • Sometimes, these subtle gaps may indicate further weakness in the markets. ( However, the effects of these gaps are lesser when such gaps occur in a trading range. ) 
  • Since the market's technical position has not changed much during the day, no further commentaries are added in this post.
  • However, the losses being suffered by the US markets on Thursday may have it's negative effects, especially at the open on Friday.
  Nifty Futures - Intra-day Chart




  Nifty Futures  - Daily Chart 



Thursday, March 10, 2011

Update for 10th March 2011




   A Flat Close and Nifty Futures Seeking Direction ?

  • First a disclosure. This author didn't attend most part of  the trading session on Wednesday. Therefore, this update is kept very short avoiding long market commentaries. However, all the data, charts and system updates are included. 
  • Nifty futures as well as the major stocks seem to be seeking direction for moving either way at present. Therefore, market seems to be going through a phase of sideways ranged trading. Here is a quote from the previous post, which might remain very relevant as of now : 'Readers are once again requested to take note that even the best analysis and the trading system outputs are susceptible to become wrong, whenever the market goes in to a trading range. This is because of the fact that trading ranges are formed as a result of haphazard trading with sudden reversals, but mainly confined to a broad range.'
  Nifty Futures - Intra-day Chart



  Nifty Futures  - Daily Chart 


Wednesday, March 9, 2011

Update for 9th March 2011





  Nifty Future Fills the Gap, Poised to Test Resistances ? 
  • We had indicated in the last post that if the gap between the candles of last Friday and Monday is not filled in the subsequent few days, Nifty futures may be forced to test the lower supports.
  • However, some easing of the political situation and the crude oil prices has helped the Nifty contracts to nicely fill the said gap on Tuesday.
  • Therefore, it seems that, barring any unforeseen developments, Nifty future may test the higher resistances at the swing high of 5600 - 5610. Beyond the swing high, the 200 DMA at 5670 may act as the next resistance.
  • Even if the contract surpasses this resistance, the 5800 level may act as a strong resistance being the upper boundary of the trading band.
  • Readers are once again requested to take note that even the best analysis and the trading system outputs are susceptible to become wrong, whenever the market goes in to a trading range. This is because of the fact that trading ranges are formed as a result of haphazard trading with sudden reversals, but mainly confined to a broad range. 
    Nifty Futures - Intra-day Chart



  Nifty Futures  - Daily Chart 


Tuesday, March 8, 2011

Update for 8th March 2011



  Nifty Future Gaps Down, May See Further Downside!
  • We said in the last post that the increasing uncertainties on the on the political and crude oil fronts may force the market to trade lower or keep it in a wide sideways trading range in the immediate future.
  • Nifty futures +opened with a gap at  5500 on Monday and the gap is still remaining open in spite of a late push by the contract to test the day's high in the afternoon.
  • As the gap is formed just after the formation of the swing high candle, the existence of this gap may indicate further weakness in the market.
  • It seems that the round figures of 5500, 5400, 5300 etc have also become somewhat important reference points for Nifty traders, in addition to the reference levels of  5550, 5450, 5350, 5225 etc., being quoted by this blog for such a long time.
  • Any further rise in the crude oil prices may force the Nifty futures to test the lower support of the rising trend line in the immediate future. ( Please see the weekly chart of the Nifty index given in the previous post. ) 
    Nifty Futures - Intra-day Chart



Monday, March 7, 2011

Update for 7th March 2011




  The Expected Test of  200 DMA at 5660 Fails ?

  • It was said in the last post that Nifty futures were seemingly poised for a test of the 200 DMA at 5660. Accordingly, Nifty Futures opened  higher and tried to breakout above the 5598 swing high on last Friday. However, it seemed that the breakout attempt was a bit premature and this might have lead to it's failure.
  • The breakout failed almost immediately as indicated by the fall back of the futures below the breakout level of 5698 in the morning session itself. Another important change seen in the market on Friday was the loss of premium by the Nifty futures. This might be indicating a failed test for the time being, unless the contract gains again in the next two or three trading days and breaks out above the 5600 levels.
  • Due to the increasing uncertainties on many fronts, ( politics, rising oil etc ) market may trade lower or in the best case scenario, remain trading sideways for some time before deciding the direction of the breakout. ( Also see the weekly chart below showing possibility of a sideways market ).
This update is also kept short, but with the usual data and charts, due to some exigencies and the regular readers are requested to kindly bear with the inconvenience.

    Nifty Futures - Intra-day Chart



  Nifty Futures  - Daily Chart 

Friday, March 4, 2011

Update for 4th March 2011



  Nifty Futures Poised for a Test of the 200 DMA at 5660 ?

  • Although, Nifty futures closed flat on a close to close basis on Thursday, the contract has retained all the positive momentum at the close.
  • Nifty futures tested the lower supports twice during the trading session on Thursday, once in the morning and the second, in the afternoon session. But both the tests ended above the lower reference level of 5450.
  • Therefore, Nifty futures seemed to be set for a test of the upper resistances. 
  • The next higher resistance above the present swing high of 5598 is the 200 DMA placed at 5660.
  • The next higher resistance above the 200 DMA is around the 5800 levels, where the futures contract and the underlying index, Nifty,  may meet the upper boundary of the long running trading channel.
  • Due to the lack of time, this update is kept short, but with all the usual charts and data. 
    Nifty Futures - Intra-day Chart



     Nifty Futures  - Daily Chart 

Thursday, March 3, 2011

Update for 3rd March 2011



  Markets Rally Hard and What Now ?
  • Markets rallied hard on the second day of the budget. It seems that the reason for the rally was not the actual budget proposals but those many things which were not in the budget. The rallies in the Asian and western markets following the then correction of oil prices after the spike also helped.
  • On Tuesday, Nifty futures opened higher above the reference level of 5350 at 5375 and started to rally right from the opening. In this process of higher open and a rally from there, a subtle gap ( the gap between Monday's last traded price and Tuesday's trading range ) has been formed in the Nifty futures contracts. These subtle gaps may sometimes indicate further strength or weakness, as the case may be, especially when formed near lows or highs.
  • As the general mood of the public including this author was negative on Tuesday, the rally was expected to fizzle out either at 5400 or at the higher reference level of 5450. As this author has written on some earlier occasions, too much of consensus is a dangerous thing in the market, the market turned dangerous to the bears once it broke out above the 5450 level by around 12 noon of Tuseday.
  • Thereafter, Nifty futures rallied almost nonstop to close just above the higher reference level of 5550. This close, incidentally, is inside the earlier resistance band between 5550 and 5600 levels.   
    Nifty Futures - Intra-day Chart



     Nifty Futures  - Daily Chart 


Tuesday, March 1, 2011

Update for 1st March 2011



     Did the Budget Give Any Clear Direction to the Markets ?

  • Fortunately or unfortunately, the last post was given a title:  ' Markets Waiting for Direction from the Budget  !'.  Now this author is forced to do a budget analysis since he himself raised the issue in the previous post.
  • But a bit of background information first. ( 1 ) Most experts, commentators, industrialists etc seen on the TV channels and who write or express their opinions in the news papers do not normally speak the real truth, as they have to be politically correct. ( 2 ) Most readers might have already heard about the budget proposals and come to their own conclusions. That makes this budget analysis difficult and of not much significance. So let's limit the scope of the analysis to a very narrow area. We will start the analysis by asking some questions. OK, here they are ....!
  • Name the stock which gained the maximum after the budget.  Answer : ITC.
  • Did ITC get any benefits out of the budget ? Ans. :  No.
  • Then why did the ITC stock rally hard after the budget ? Ans. : Yeah, everybody and their uncles were expecting some more taxes on tobacco. But no new taxes were proposed in the budget.
  • I see, so the reason for the stock bounces were not the budget proposals but the absence of any higher taxes, right ?
  • Yeah, you are perfectly on the target.  
  • Now let's see what other expected raises were not there in the budget !  Here they are ! No raise of excises duty and service tax to the pre-bear market rates of 12 %, no raising of the dreaded STT or capital gains tax, no new taxes on the corporates and the rich etc.
  • Will the absence of these dreaded increases make a budget a better budget ? Ans : No.
  • Is there anything in the budget to reduce the high inflation, which actually is the biggest tax on the poor ? Ans. : No.
  • Does it talk about the oil price problem and the heavy subsidies ? No. Apart from a promise to disburse some subsidies directly to the poor, there is nothing in the budget. The budget doesn't even acknowledge the problem of rising oil prices and deficit of the oil marketing companies. Even the expectations of a cut of the customs duty on the crude oil  were belied. 
  • So, after all, what is your opinion about the union budget ?  Ans. : It's a budget of no consequences because it implies just the continuation of the present. Just a status quo budget sprinkled with some added masala of make-believe populism. That's all.     

   Nifty Futures - Intra-day Chart