Sunday, May 1, 2011

Update for 2nd May 2011

 Nifty Futures Critically Poised Again

  • Nifty ended up with losses on all five days of the previous week and finally closed at the lower end of the present trading range. However, trading was still confined to the month old narrow trading range of 5750 to 5950.
  • Some four weeks back we had opined  that some sideways trading  or a consolidation was the preferred short term view. Since then, Nifty futures kept itself mostly inside the narrow trading range.
  • It is still impossible to take a view about the break out direction from the arrow trading  range. Moreover, as the market has made losses in succession for five days some positive closing or short covering may be imminent. As such, traders may look for partial booking of profits or hedging of short positions at the lower end of the narrow trading range at the 5700 - 5750 range. 
   Nifty Futures - Intra-day Chart

   Nifty Futures  - Daily Chart 
  • At the lower end of the present narrow trading band, Nifty future has support from the 200 and 100 DMAs at 5760 and 5720. It has some support from the previous month's low of 5700.
  • Similarly, the upper resistance is from the falling supply line at around 5900. It has some resistance at 5950 too.
  • A break of the lower support may see the Nifty contracts falling to the next support level of 5400 to 5550 levels. 
  • A break of the upper resistance may also lead to a similar action of around 200 to 250 points to 6150 to 6200.
 S&P CNX Nifty Index - Weekly Chart

  • As seen in the weekly chart, Nifty index has been hovering at the top end of the lower trading channel. Any lower break of the index from the present narrow trading channel may therefore lead to a revisit of the lower support of the channel at around the 5400 levels.
  • The coming week may see the RBI credit policy action. It seems that the highly calibrated baby step approach of the RBI has not been effective at all to control inflation and therefore, the central bank may be forced to take the more aggressive step of increasing the administered  rates by 50 basis points ( 0.5 % ) and some raise in the cash reserve ratio ( CRR ).
  • It seems that a raise of 25 basis points in the repo and reverse repo rates has been discounted by the market. Therefore, any aggressive action by the RBI may lead to a break of the short term support of 5700. But an action in the expected lines may lead to some short covering rally and even a test of the upper resistances.

   Nifty Options Scene   

The May series Nifty Options Put Call ratio ( PCR May series ) closed at a normal 1.29 times on Friday. There were new build up of May series option open interest in a wide range from as low as 5300 to a high of 6200. These OI build up also confirm our analysis about the possibility of a break out from the month old trading range in May.  The highest OI of Nifty calls was at the 6000 strike. However, the strikes of 5700, 5600 and 5400 held almost identical OI of Put options.    
 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 21.36, 3.65 and  1.09 respectively as on  29th 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 Signal ended lower in the negative momentum territory  with a value of -100 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 02nd May, 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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