Update for 29th July 2011

 The Test of 50 DMA ( 5525 ) is On !  

Yesterday's derivative expiry did not lead to any free fall and the expiry was managed in the vicinity of the 5500 strike. It seems that the lower open helped the market to retain the ability to test the gap at the open. However, today's market action of another lower open below the yesterday's range and a test of yesterday's high and 50 DMA  may be indicating a sort of short term reversal. If today's  rally leads to a close above the 50 DMA  or a better close above the 5550 level, then it may be construed that the market is still bound by the earlier tight trading range between the 50 DMA and the 200 DMA. Until the market breaks out clearly out of this trading range, most technical indicators designed to trade trends may continue to whipsaw. However, a failure to clear the 5550 level may lead to a test of lows and even the continuation of the correction.

   Nifty Futures - Daily Chart  

Update for 28th July 2011

 The Battle for the 5500 Strike is On !  

The major option position build up at the 5500 strike is acting as a major battle point in today's trading, although some of the Put build up has moved to the 5400 strike. Some more Call selling was observed at the 5500 strike. Though the option writers would like an expiry at around the 5500 strike, it is still unclear whether this will be managed because of the external factors. The next support for the market below the earlier 5500 - 5520 support is around the 5350 - 5400 area. 

   Nifty Futures - Daily Chart   

Update for 27th July 2011

 Nifty Future Back to the 100 DMA !  

Following the higher than expected hike of interest rates by the RBI on Tuesday, Nifty future has already abandoned it's tentative move to test the higher resistances and returned to the more familiar level of 5880 where the 100 DMA is situated now. The important question now is whether the contract will test the lower support of 5500 and 50 DMA at 5520. As the 5500 strike is having huge Put option open interest, the level may act as a major reference point for today and tomorrow. Though unlikely, in case the 5500 level is broken before the expiry, it may lead to a mad scramble to secure the open positions by the put writers. They could cover / hedge their positions either by buying the open puts at a loss or by selling Nifty futures. As the time before expiry is short, some of them may hedge short puts by selling Nifty futures and this may lead to a sharp fall to the next strike at 5400. Apart from this, there is no change to the technical position of the market.  

   Nifty Futures - Daily Chart   

Finally, RBI takes Charge !

RBI has raised the repo rate by an unexpected 50 basis points today. This is the first time the central bank has taken a bold stand in the past one and a half years or so in which inflation has been galloping almost uncontrolled. It is sad to recall that the central bank has been treating the ever rising inflation with kid gloves and it even seemed that the Bank is not in control of the situation. But the tragedy is that the lethargy at the RBI has lead to a situation where the higher inflation has become entrenched in the economy and it may require even higher rates to remedy the situation. 

Even if it is rhetorical, some firm interest rate action at the start of the rising inflation curve would have been more effective than the initial eye in the sand mode in which it operated initially. The shock and awe of such an initial strong action would have created lesser hassles than the late in the cycle tightening which will lead to more damage to the long term economic growth.

    

Yeah, the latest RBI action once again forces one to recall the wisdom in the old saying !  Yeah, it says ' a stitch in time saves nine !'        

Some previous posts on the subject :

 Is this Monetary Policy on Non- Policy ?

 Does Inflation Affect the Nifty Valuations ?


 RBI Willing to Strike, But Afraid to Hurt Again !

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Update for 26th July 2011

    Nifty Futures Near the Resistance   

Nifty futures closed just below the resistance band between 5700 and 5760 yesterday. It is almost impossible to guess whether a breakout will happen now or not because of the mostly tight range in which markets are trading now. Please read the previous post for more information on resistances and supports.

   Nifty Futures - Daily Chart 

Update for 25th July 2011

    Another Bounce, Now What ?      

• The technical position of the whole market has not changed at all in the past week.
• Nifty futures and Nifty index are steadfastly trading around the 100 DMA at around the 5890.
• All attempts to break out from the narrow range have failed so far.
• Lower supports for the market are at the 5500 - 5550 ( 50 DMA at 5515 ) and 5350 - 5400 levels. 
• Similarly the resistance is at the last week's high at 5650-5660 and  5700 -5760 levels.
• Even if the market breaks out  firmly above the last Friday's high, it will still face the resistance at the 5700 -5760 area from the forward slanting supply line as well as the 200 DMA.
• If the market successfully breaks out above the 5700 -5760 area, then, a rally to 5900 to 5950 may be expected. 
• As already stated in the previous posts, a firm break out above or below the major resistances or supports is becoming a requisite before for most technical signals could start working.      

  Nifty Futures - Daily Chart 

Nifty Futures - Daily Moving Averages Chart 

Update for 22nd July 2011

    More of Listless Trading ?       

As Nifty futures have been trading in a horizontal range around the 100 DMA at 5586 for the past one and a half weeks, we may expect listless trading to continue till some breakout happens. Most technical signals or indicators may whipsaw till then. This edition is limited to just minimum system updates for the aforesaid reason. 

  Nifty Futures - Daily Chart  

Update for 21st July 2011

                                     Back to Square One !                                                                                                          

Nifty futures are back to square one as it has again come back to the last week's trading range around the 100 DMA. There is no change in the technical out look as such. Please read the previous posts for a detailed technical view. Readers may please note that the Momentum Signal system is susceptible to whipsaws in ranged markets and the fact is already disclosed in the risk factors page. It seems that some kind of a breakout in either direction is becoming a requisite before the technical signals starts working.

  Nifty Futures - Daily Chart   

Update for 20th July 2011

   A Bounce from the Support Area !

Yesterday, Nifty futures bounced from the upper end of the earlier indicated support area of 5500 - 5550. In fact, Nifty futures recorded nearly identical lows at around the 5560 mark on three trading days. Once the market finds that it is not breaking a support, it tends to move to the opposite direction and tries to test the next resistance. Last week's high at around the 5660 - 5670 remains as the short term resistance. If this level is taken out, then the resistance from the 200 DMA and downward moving upper resistance line at the 5700 - 5750 level may come in to play. Barring a breakout above the latter resistance, Nifty may spend some more time trading directionless in the broad trading range of 5500 to 5700 in the immediate future.

Nifty Futures - Daily Chart  

Update for 19th July 2011

  Nifty Futures are Still In No-Man's Land ?

There has been no change in the technical position of the market since the previous post. Hence, this post is limited to the charts and system updates.

Nifty Futures - Daily Chart  

Nifty Options Scene   

The July series Nifty Options Put Call ratio ( PCR July series ) closed unchanged at a 1.12 times as on Monday. 

Update for 18th July 2011

    Nifty Futures In No-Man's Land ? 

It seems that Nifty futures is stuck in the no-mans land at present. Though the trading was highly volatile, Nifty futures closed without much change for the last four trading days. Moreover, in spite of the Momentum Signal going in to the negative territory, Nifty futures has remained steadfastly above the support of 5500  - 5550 area. 

Nifty Futures - Daily Chart   

   

Nifty Futures - Daily Moving Averages Chart

Update for 15th July 2011

   Nifty Futures' Direction - Still Undecided ?

The gaps in the charts of indices were filled as on yesterday. But, the direction of Nifty seems to be still undecided and it is still enjoying support at the 5500 - 5550 levels. Due to other pre-occupations, this edition is kept short with just the system updates.

Nifty Futures - Daily Chart       

Nifty Options Scene   

The July series Nifty Options Put Call ratio ( PCR July series ) closed higher at a  1.18 times on Thursday.

Update for 14th July 2011

  Nifty Futures Still Supported by the 50 DMA ?

The gap seen in the daily chart of Nifty future was filled yesterday. But the gaps in the daily charts of the Nifty and Sensex  are still open and this makes the technical position tricky. Except for these comments today's update is limited to just charts and system updates. 

Nifty Futures - Daily Chart    

Update for 13th July 2011

 Nifty Futures Supported by the 50 DMA ?

Nifty futures reversed from the 200 DMA at 5750 level and traded lower to reach the 50 DMA at 5505. The 100 DMA is presently placed at 5575. Most of the trading yesterday was confined between these 50 and 100 DMAs. The presence of a wide gap between the trading ranges of the last two days also complicates the technical position. Such a gap may attract the market to fill it in the short term. Now, if the gap does not get filled in the next few days, the downtrend may continue with a minimum target of 5450. A break of  the 5500 level and 50 DMA may also lead to a revisit of the 5350 - 5400 support levels. However, all these are contingent upon the markets failing to cross the 100 DMA, filling the gap and closing above these important points.

Nifty Futures - Moving Averages Chart  

Nifty Futures - Daily Chart     

Update for 12th July 2011

The Reversal Leading to a Correction ?

As on yesterday's close, the Ultimate Momentum Signal closed in the neutral territory. The last buy signal was given by the system on 27th June, 2011 at a Nifty future level of 5537. This buy signal lead to maximum favorable excursion ( MFE ) or maximum profit opportunity of 223 Nifty points. 

Meanwhile, as envisaged in all the three previous posts, Nifty future has returned to the lower support area of 5500 to 5550 level as a consequence of it's failure to break above the 5750 - 5760 resistance. Now the important question is whether the correction would continue or not. Irrespective of the outcome, the Momentum Signal seems to be poised to give a sell signal as on today's close unless the market makes a strong recovery intraday. In case the correction continues after some trials to fill the gap between yesterday's and  today's trading ranges, the next support would be at the 5350 - 5400 levels where the lower boundary of the old trading channel is situated at present.

Nifty Futures - Daily Chart    

Update for 11th July 2011

 

     A Short Term Reversal in the Making ?

After the last Thursday's phenomenal rally,  Nifty futures opened almost exactly at the 200 day moving average ( 200 DMA ) and thereafter started to slip slowly on Friday. The slow drift accelerated in the afternoon session in to a mini sell off. Nifty futures and the underlying index closed almost at the day's lows. Friday's fall has not only reversed most of the gains achieved on Thursday but also has lead to the formation of a Dark Cloud Cover model pattern in the daily chart. This pattern can be associated with short term reversals, especially, if the open is near or above a resistance. As the open was at the significant resistance of 200 DMA and the falling trend line, this pattern can be indicating a a real short term reversal or at the least, some sideways trading.

Nifty Futures - 5 Minute Intraday  Chart

   

Nifty Futures - Daily Chart    

S&P CNX Nifty Index - Weekly Chart 

Update for 8th July 2011

    Index and Futures Reach 200 DMAs !

Nifty futures contracts and the underlying index have almost reached the target of 5750 - 5760 mentioned in some of the previous posts. Since the 200 DMA  coincides with the falling trend line, it is still not clear whether the rally would be able to break above these resistance area now, or later on, after a sideways move or a correction.

Nifty Futures - Daily Chart   

Update for 7th July 2011

    Three Days of Consolidation and What Now ?

After three days of consolidation in the form of sideways trading, Nifty futures contract is seen trying to test the resistances today morning. It is almost impossible to outguess the outcome of this test as of now. Apart from the above, there is no change in the technical position of the market. Please read the previous posts for more analysis on support and resistances. A breakout above the immediate resistance in the 5700 - 5750 area is necessary for the continuation of the rally and a change of outlook for the medium term. A failure may lead to a revisit of the 5550 levels in the short term.  

Nifty Futures - Daily Chart    

Update for 6th July 2011

   Nifty Futures Trading in Sideways Mode ?

As envisaged in the previous posts, Nifty futures is seemingly trading in a sideways mode. As there isn't any perceptible change in the technical position of the market, this update is kept short.

Nifty Futures - Daily Chart 

Update for 5th July 2011

  Rally has Hit a Speed Breaker ?

Nifty futures traded mostly sideways yesterday, though the contract opened, traded and ended up in the positive territory. And Monday's high remained lower than the previous day's high of 5702 at 5690. The low also remained higher than Friday's low. Volumes were also very low  This has lead to the formation of a low volume inside day candle in the daily chart of the Nifty contracts and the major indices. An inside day candle after a strong rally can indicate a pause to even a reversal at some times. But a scenario of some more of sideways trading and another test the resistances is also a plausible right now. Today's trading so far is also pointing towards this scenario of sideways movements. Please see the previous two posts for a detailed discussion on the technical position as well as a discussion on supports and resistances.

Nifty Futures - Daily Chart 

Update for 4th July 2011

  Another Test of 5700 - 5750 Resistance Level !

Due to the fall in the market heavy weight stock Reliance, Nifty futures reversed from the 5700 level on last Friday. Even otherwise, the Nifty contracts were due for some pause or a small correction due to the non-stop nature of the recent rally. As the international markets have rallied further, we may expect a higher open and possibly, another test of the 5700 - 5750 resistance level. Nifty future may face multiple resistance from the 200 day simple moving average ( DMA ) at 5760 and the falling trend line drawn from the last November high. ( Please see the various charts below for details  ).

Nifty Futures - Moving Averages Chart ( DMAs )  

Nifty Futures - Daily Chart

Update for 1st July 2011

  Nifty Future Touches the 5700 level !

The Nifty futures contract touched the lower end of the expected 5700 - 5750 target this morning. Please read the previous posts for more information on this expected target. Now, as already pointed out in the previous post, the front line stocks may take a breather while the second rung stocks may continue to rally. 

Nifty futures - Daily Chart