Tuesday, April 5, 2011

Update for 5th April 2011

   Will the Markets Take a Breather Now ?

  • Nifty futures continued with it's relentless up move on Monday, though a slight slow down or some more of sideways trading was expected.
  • It seems that the market at present is lead by those FIIs who are short term momentum traders. The weakness in the Dollar index is also pushing them to buy non Dollar assets whereby they benefit from the asset price rise as well as the currency appreciation. However, generally speaking, such sudden rallies have not been much beneficial to the market in the longer term, as when the momentum traders ( read FIIs ) start selling, the gains may disappear just like the way it appeared. 
  • As the rally has already run vertically and gained so much in such a short time frame, some slow down to the relentless move can be expected now. The rising crude oil prices may act as a break to the fast rally at any time.
  • However, as matter of abundant caution, it may be noted that the present rally which came after a long period of sideways trading can travel much higher than the popular expectations.
    Nifty Futures - Intra-day Chart

  Nifty Futures  - Daily Chart 

  • The 5950 to 6000 area may act as a resistance to the Nifty futures contracts. The 5950 area was the lower boundary of the trading range in which the previous highs were traded and therefore this area may offer some resistance. Moreover, the the falling trend line joining the previous two highs also intersects the present upswing around these levels. 
  • In case the market breaks out above the falling trend line described above, the next resistances are at the two previous highs at 6200 and 6330 levels. 
  • On the lower side, Nifty future has support from the 100 and 200 day moving averages ( DMAs ) at around the 5700 to 5750 area.

 Nifty Options Scene   

The April series Nifty Options Put Call ratio ( PCR April series ) increased to 1.50 times on Monday. ( In the Indian context a  lower PCR is generally associated with market falls and this is just the opposite of what many option textbooks suggest. ) The India VIX index closed flat at 20.06 as on Friday indicating a bullish bias. Huge Put writing was seen at the 5900, 5800 and 5400 strikes on Monday. The 6000, 5800 and 5900 strikes are having the highest level of April Nifty Call OI as on Monday.  The corresponding strikes for Put OI are 5400, 5700, 5600 and 5800. Nifty options are active in a wide area which starts from the 5300 put to the 6200 call at present.  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. However, the data still generally points towards a positive bias for the markets at present.
 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 22.43, 3.75 and  1.06 respectively as on  4th 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 eighth day in succession as on Monday.

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  5th 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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