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 

 Nifty Options Scene   

The March series Nifty Options Put Call ratio ( PCR )  remained mostly unchanged at 1.08 times on  Monday. The Put Call ratio still remains above par at present. ( In the Indian context lower PCR is generally associated with market falls and this is just the opposite of what many option textbooks suggest. ) The India VIX index decreased by 2.62 % and closed at 25.21. As the unchanged PCR would suggest, the option scene also did not change on Monday. The 5500, 5600 and 5700 strikes have become the strikes with the highest level of March Nifty Call OI as on Monday.   The corresponding strikes for Put OI are 5300, 5300 and 5200.  The decrease in the PCR may have lead to the  fading of the hitherto mildly bullish nature of the markets. 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 has lead to a situation where the option writers are taking it as a field day for writing straddles and strangles. However, 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 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 20.58, 3.40 and  1.16 respectively as on  21st 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 ended up in the maximum negative momentum territory with a100 value for the third day in succession. 

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  22nd 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.
Click on the table above for an enlarged view.

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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