Back in the Old Trading Channel, Now What ?
After the stupendous rally of last Friday, Nifty index and the futures contracts are already back in the old trading channel. Now, the important question is whether the present bounce is the start of new leg of medium term trend or not. Unfortunately, the answer to the million dollar question will remain unanswered until the market itself reveals it's hands. As the important question remains unanswered, let's examine the key takeaways from the recent market action. Firstly, the old trading channel was broken. Secondly, as the weekly close was inside the channel, let's give the benefit of doubt to the fact that the channel remains intact for the time being. Third, the 5175 - 5200 area has become more important support or reference area because of the double bottom pattern. Fourth, the falling trend line or supply area still remains above the market. Fifth, the horizontal support at 5175 - 5200 area and the falling trend line is showing a descending triangle pattern in the charts. Fifth, until the market closes above the medium term falling trend line and remains inside the channel, the chances of the market breaking the lower end of the channel remains. ( Please see the daily and weekly charts below. )
On the fundamental front too, inflation remains high and the end of the rate hike cycle of RBI is not yet expected by the market participants. Other political and economic concerns also remain at heightened levels. So long as this myriad problems remain at the present levels, market may remain as a traders' market with two way movements without any firm direction. However, this analysis is subject to the fact that markets have a tendency to make the turn around some five - six months before the interest rate cycle peaks.
S&P CNX Nifty Index - Weekly Chart
Major resistance from the falling trend line in the coming week is at 5730 levels. Similarly, the major support from the lower end of the trading channel is available at 5300 - 5320 levels. Other support and resistances in the expiry week would be around / at the Nifty option strikes of 5400, 5500 and 5600.
Subject to the above caveats, Momentum Signal system may end up with a buy signal as on the close of Monday's trading.
Nifty Options Scene
The June series Nifty Options Put Call ratio ( PCR June series ) improved tremendously to 1.28 times on Friday on the back of the strong rally. The change in the Nifty option positions indicate support at 5400 and resistance at 5500 and 5600 for the time being. ( Please see the Option Pain chart below. )
Option Pain Chart - Nifty June Series 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 20.17, 3.39 and 1.30 respectively as on 24th 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 moved in to neutral territory with value of -0- as on Friday. However, the Momentum Signal in respect of BSE Sensex has already moved in to positive territory with a value of +50.
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 27th 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 !!!
To access and/or download the free online Position Limit Calculator click here. ( Please use the latest or updated browsers to access the Google Documents service. )
Disclaimer: No research, information or content contained herein or in the accompanied spreadsheet shall be construed as advice and is offered for information and educational purposes only. We shall not be responsible and disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered by the user or any third party as a result of or which may be attributable, directly or indirectly, to the use of or reliance on any information or service provided. All files/information is provided 'as is' with no warranty or guarantee as to its reliability or accuracy. We do not recommend, promote, endorse or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed on the site by Google AdSense.
No comments:
Post a Comment