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

  Nifty Futures  - Daily Chart 

  • The daily chart above shows the gap between the candles of last Friday and Monday. If the gap is not filled with in the next few days, Nifty future may revisit the area between 5250 and  5300. 
  • However, whether Nifty will break below the rising support line and trade towards the lower support area of 4700 to 4800 is anybody's guess right now.
  • All earlier indicated reference points like 5225, 5350, 5450 and 5550 are still good and valid for intra-day analysis and trading. Traders may also consider the round figure  reference levels 5300, 5400, 5500 and 5600 for the same purpose. 
  • Nifty futures and Sensex somehow managed to remain in the positive momentum area as on Monday . However, the momentum signal value of Nifty index has already closed in the neutral momentum area, indicating loss of the upward momentum.
 Nifty Options Scene   

The March series Nifty Options Put Call ratio ( PCR )  closed at 1.30 times on  Monday. The India VIX index  jumped higher and closed at 225.22, gaining 10.08 %. Call open interest increased at the 5400 and 5500 strikes .indicating  call writing. However, significant decrease in the Call OI was seen at the 5600 strike on Monday.  Some covering / profit booking of Puts options were seen at the strikes of 5500 and 5600 as indicated by the decrease in Put OI. 

 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 20.92, 3.46 and  1.14 respectively as on  7th March, 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). 

 Latest Ultimate Momentum Signal

Nifty futures and Sensex somehow managed to remain in the positive momentum area as on Monday . However, the momentum signal value of Nifty index has already closed in the neutral momentum area indicating loss of upward momentum.

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 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.

Please click on the table to enlarge. For more info on the above table,  please click here.
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. 

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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