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 

  Nifty Futures  - DMAs Chart

  • The chart above shows the various simple daily moving averages of Nifty futures. All major medium term DMAs, ie. the 50, 100 and 200 DMAs, are presently hovering above the market. The 20, 50, 100 and 200 DMAs are at 5478, 5600, 5815 and 5680 respectively.
Nifty Futures  - 14 Day ADX Chart  

  • The 14 day ADX ( Average Directional Index ) chart also shows the absence of any trend in the Nifty contracts. The chart indicates this through the following two different ways : ( 1 ) The frequent crossovers of +DI and -DI ( red and green lines ) and  ( 2 ) The ADX line ( blue line ) below the 20 mark also generally denotes the absence of any trend.
  • As a matter of abundant caution, readers may note that : ( 1 ) ADX has considerable lag in indicating the start of a trend and therefore ( 2 ) the absence of a trend at present doesn't  prevent the market from starting a trend. 
 Nifty Options Scene   

The March series Nifty Options Put Call ratio ( PCR )  increased  to close at 1.40 times on Monday. The India VIX index also fell by 3.43 % following the rally and closed at 23.3.   The 5500, 5700 and 5600 strikes have kept their positions as the strikes with the highest level of March Nifty Call OI as on Monday.  The corresponding strikes for Put OI are 5400, 5300 and 5200.  This data may be indicating the possibility of an immediate trading range between 5300 and 5700. Significant additions to the Put option open interest were seen at the strikes of 5500, 5400 and 5100. Some Call writing was also seen at the 5500, 5600, 5800 and 5900 strikes. The implied volatility of Nifty options as indicated by the India VIX has been hovering in the 20 plus mark for some time  even as the  market is generally trading range bound. It seems that the improvement in India VIX and the neutral nature of the markets are leading to a situation where the option writers are taking it as a field day for writing straddles and strangles.

 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 21.18, 3.50 and  1.12 respectively as on  14th March, 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). 

 Latest Ultimate Momentum Signal 
The Momentum Signal has again moved in the buy territory as on Monday. However, considering the sideways nature of the markets, it remains to be seen whether this buy signal will lead to any profitable trade. Therefore, all readers are once again requested to note that the Momentum Signal trading system is susceptible to whipsaw trades in  ranged markets as is being observed now. 

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  15th March, 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.
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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