Sunday, May 29, 2011

Update for 30th May 2011

   Has Some More Strength left in the Latest Bounce  ?

  • As indicated in the previous post, Nifty future has bounced from expected support of the 5350 - 5400 area, albeit after a mild crack. 
  • This area had recent supports from both technical and fundamental points of view.
  • Now the question is whether the bounce has the fire power to rally more ! In the last post, it was mentioned that since the bounce came from the supports, it may try to test the middle area of the old trading channel. 
  • Now, let's continue the scenario analysis  with the help of various charts, data and the Momentum Signal.    

 Nifty Futures - Intra-day Chart     

     Nifty Futures  - Daily Chart  

S&P CNX Nifty Index - Weekly Chart

  • The weekly chart of Nifty index shows the minor recovery  at the end of last week. In case there is any follow up buying arising, the rally may try to test the downward sloping supply line at around the middle of the old trading area. Since the old channel has a width of around 650 points, the rally may have the potential to test 5650 levels in an ideal situation. ( ie 5325 low + 325 points = 5650 ) 
  • Though unlikely in the very immediate future, if the market breaks the one and half year old trading channel to the downside, a deep correction to the tune of 400 to 500 points in the Nifty can also be expected subject to some minor support at 5175 to 5225 area. 
 Nifty Futures - ( Various )  Daily Moving Averages Chart

  • The various daily moving averages ( DMAs )of the front month Nifty futures are seen in the above chart. The 20, 50, 100 and 200  DMAs are presently hovering at 5492,  5645, 5615 and 5767 levels. 
  • Therefore, the first resistance is from the 20 DMA at the 5492 levels. If Nifty future closes above the 20 DMA, the next target can be the 5600 - 5650 level coinciding with the middle area of the trading channel.
  • In the best case scenario of the rally going further, it may test the 200 DMA at 5750 - 5800 levels.  
  • Traders may also note that the risk levels are higher at these times because of various factors like rising costs, inflation and interest rates etc in the Indian context, European sovereign debt problems and above all, the impending end of mother of all bailouts, the QE 2 of the Federal Reserve, in U S A. There are very widely and wildly divided opinions about the aftermath of the end of QE 2, which simply indicate that no one really knows anything about after effects. Therefore, all these projections are given here as part of scenario analysis which can change at any time and are not any trade recommendations.

  Nifty Options Scene   

The June series Nifty Options Put Call ratio ( PCR May series ) was hovering at a very normal 1.31 times on Friday. The PCR  as such is not showing any negative bias to the market as of now unlike in the previous month.

 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 20.26, 3.44 and  1.23 respectively as on  27th May 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 has remained in the negative neutral territory  with a value of  -10 as on Friday. Any close above the 5427 level may lead to a +50 Momentum Signal 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  30th 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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