Monday, April 4, 2011

Update for 4th April 2011

  Congrats to Team India, We are Proud of You ! 

 Shall We Expect a Euphoric Gap Up Open Too ?
  • Team India and  it's captain rose to the expectations of every Indian over the weekend to regain the Cricket World Cup for the second time in history. 
  • too is joining the celebrations by going in for a hastily done theme color change of the blog. Hats off to the men in blue ! 
  • Now the question is : Will the Indian stock market too move out from a phase of recent under performance to out performance ? ( This blogger is not talking about the past week's rally but about the under performance which has been there for the past four months or so. )
  • It is said that soccer world cup wins are associated with out-performance or better economic conditions in the winning countries, in the short to medium term. Unfortunately, it is not known whether any similar betterment of  economic conditions can be expected after cricket world cup wins.  
  • Then the next question is : Shall we at least expect a euphoric gap up open on Monday ? 
  • The answer seems to an yes due to the positive closes achieved by most other stock markets on Friday.  However, stock market is not a place where euphoria is beneficial to any one!   
    Nifty Futures - Intra-day Chart

  • After eight days of gains, Nifty futures were expected to consolidate by Friday. Nifty futures did just that  on last Friday by trading sideways in a very range and closing with slight loses.

      Nifty Futures  - Daily Chart 

    • Friday's trading has lead to the formation of an inside day's candle in the charts of Nifty index and BSE Sensex. The formation of such a candle after a fast move may indicate a consolidation or even a reversal.
    • As the inside day candle is formed in the target cum resistance area of 5850 to 5900, traders may give better attention to the market action around these levels. Please see the weekly chart of the Nifty index below for more information why this area may act as a medium level resistance 
     S&P CNX Nifty Index - Weekly Chart

    • Nifty future and the underlying Nifty index is presently poised just below the upper boundary of a very old trading channel. ( Seen as the lower upward moving trading channel.) Please see that the breakout above this channel in late September lead to a rally of 650 points. Please also note that when the lower boundary of the upper channel was breached in the early January, markets were supported by the lower boundary of the old channel. Please also see that, in between, market has a shown a tendency of spending some time just below and above the middle boundary before either reversing or breaching the said middle boundary.
    • Therefore, in normal circumstances, we may expect the market to trade sideways or to correct some 200 to 300 points from the middle boundary before the occurrence of the next major market movement. As such market may trade in the upper half part of the lower trading channel for some time. ( Please see the shaded area on the right side of the chart. )
    • If the above scenario plays out in the immediate future, Nifty future may trade between 5700 and 5900 for the time being as part of a consolidation.  Lower supports are 5550, 5600. 
    • However, bullish signals in the weekly charts and some more buying induced by the weakening Dollar index by the FFIs may help the rally to continue provided ensuing corporate result season and crude oil prices do not spoil the party mood on Dalal street..
     Nifty Options Scene   

    The April series Nifty Options Put Call ratio ( PCR March series ) is hovering at a normal 1.28 times 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 lost 9.33 % and closed at 20.11 as on Friday indicating a bullish bias. Huge writing of Call options were seen at the strikes of 5900 and 6000 on Friday. Huge Put writing was also seen at 5300, 5400,5700 and 5800 strikes. The 6000, 5800 and 5900 strikes are having the highest level of April Nifty Call OI as on Friday.  The corresponding strikes for Put OI are 5700, 5500 and 5400. The option open interest data seems to suggest the existence of wide disparities in the expectation of the market participants about the immediate market direction and range.   
     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 21.59, 3.70 and  1.07 respectively as on  1st April, 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 Signals have closed with the maximum +100 values for the seventh day in succession as on Friday.

    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  4th April, 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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