Thursday, June 16, 2011

Update for 16th June 2011

     Market Bracing Up for the Rate Hike !

  • On the penultimate day of trading before the expected interest rate hike by the RBI, the interest sensitive stocks sold off and the indices closed at a two week low. 
  • The weakness in the market heavy weight stock Reliance is also adding to the woes of the market.
  • It seems that a 25 basis point hike by the RBI is already discounted by the market. 
  • Any tougher than expected talk by the RBI together with the expected 25 basis point or an unexpected 50 basis point hike can lead to sell off in the market.
  • Even otherwise, market has been lacking both volumes and trading interest for some time and therefore a break form the present trading range can be expected.
  • Overnight losses in the international markets may also add to the negative momentum.
  • However, a lower open and no hike or the expected 25 basis point hike together with some mild talk or an indication of the end of the hike cycle by the RBI may lead to a temporary short covering rally as well.
  • The immediate lower support for the market is at the 5300 to 5350 levels coinciding with the rising long term lower boundary of the trading channel. ( Please see the Nifty Index weekly chart below. ) Though Nifty index has a minor support at the previous swing low of 5175 - 5225 area, the break of the long term support line at the former level may lead to a deep sell off as well. 
   Nifty Futures - Intra-day Chart   


  Nifty Futures  - Daily Chart 

S&P CNX Nifty Index Weekly Chart  

Nifty Options Scene   

The June series Nifty Options Put Call ratio ( PCR June series ) weakened significantly to 1.17 times on Wednesday. Active covering of short Put option contracts were seen at the strikes of 5500, 5600 and 5400. New selling of Call options were also seen at the same strikes. The maximum open interest of June series Nifty Put options is still placed at the 5400 strike 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 20.12, 3.38 and  1.30 respectively as on 15th June 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 momentum territory with a maximum negative value of -100 as on Wednesday.

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  16th June, 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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