The Ultimate Momentum Signal

Tuesday, August 31, 2010

Update on The Ultimate Momentum Signal - 1st Sept. 2010

Nifty Rebounds from the 5350 Support ... !!!

On the back of negative cues from the international markets, the Nifty futures opened lower at 5392 on Tuesday. It sold off further and broke the two day old support at 5390 to test the support at the 5350 levels. Please note that charts on this blog had been showing this important one and a half month old support for the past month or so. The Nifty futures recovered in a late rally from a low of 5356 to reach the day's high of 5414 at the closing time. The futures finally closed at 5399 with a loss of 30 points. Even though the markets closed after recovering some of the losses, the futures failed to reach the previous day's closing / last traded price by a wide margin. These kinds of subtle gaps have been pointed out in this blog in earlier posts too as signals of trend change. But Tuesday's subtle gap does not seem to imply much from the preliminary observation. If the international markets are providing positive cues on Wednesday, the futures may even fill the subtle gap and test the resistance zone at the 5450 - 5465 levels. The trading range for Wednesday may remain between 5350 to 5465. As seen and being pointed out on his blog in the recent past, if the market fails in the test of an important resistance, it may test the support and vice versa. As such traders can expect two way trade in the new range between 5350 and 5465 for some time barring a covering rally above the 5465 levels.

Nifty Futures - Daily Chart

Even though the Nifty future broke below the 50 DMA during the last trading day, the last closes coincided with the support. Tuesday's market action has lead to the formation of doji kind of candle which may indicate short term support or reversal on the daily charts. The lower panel of the above chart shows the various daily moving averages ( DMAs ) of the Nifty futures. The 20, 50,100 and 200 DMAs of the futures are placed at 5460, 5398, 5266 and 5177 respectively as on 31st August 2010. The futures may get supports at these various DMAs which are below the market and other previous lows in case of a mild correction. Similarly, the 10 DMA at 5475 offers resistance too.

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on 31st August, 2010 is given below :

Both the indices Nifty and Sensex and the Nifty futures have closed with -100 Momentum Signal values on Tuesday.

Projected Momentum Signal Close Values

The projected levels Momentum Signal values applicable to various ranges of closing values of the Nifty Futures, Nifty Index and the BSE Sensex, as at the close of next trading day, ie. as on 1st September, 2010, are given in the following table.

Please click on the table to enlarge. For more info on the above table, please click here.

As matter of abundant caution, it is reiterated that the market may still be range bound by all effects and therefore, the risks of the system indicating whipsaw signals are extremely high if the markets remain range bound.

"Readers of this blog may please note the following 'Risk Factor' which is being repeated almost daily these days. The markets may be trading in small ranges at the top end of a slow climb and for all practical purposes the trading may remain range bound. Range bound markets are not suitable for the profitable trading of the Momentum Signal system."

"As the Momentum Signal is primarily a trend following system, it may indicate whipsaw signals in range bound markets. As such, all readers of this blog are requested to read the various pages describing the system and understand all the intricacies of trading the Momentum Signal and it's risk factors too. Please do write in your comments and suggestions."

Cheers and Prosperous Investing and Trading !!!

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Disclaimer: No research, information or content contained herein or in the accompanied spreadsheet shall be construed as advice and is offered for information 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.

Monday, August 30, 2010

Update on The Ultimate Momentum Signal - 31st Aug. 2010

Nifty Futures Between the 50 and 20 DMAs ... !!!

On Monday, the first day of the current trading week, the Nifty futures opened higher with a bang on the back of the late Friday's rally in the Wall street. As expected, the futures tested the first level of resistance at the 5460 level. The futures traded above the 5460 level for a very short time at the opening. However, it could not sustain the gains and the correction set in right away. After hovering flat for some time below the 5445 levels it hit a low of 5391 by 2.30 PM, which was even below the previous day's lows. However, as the Nifty and Sensex did not break below the previous lows, the futures too recovered trapping the sellers who sold below the previous day's lows. The news about the retention of 0 % long term capital gains tax status of equities in the new direct taxes code also helped the relief cum covering rally in the last hour of trading. The Nifty futures closed at 5429 with a premium of 12 points above the Nifty index.

Nifty Futures - Daily Chart

The five trading days old correction has brought the futures between the 50 and 20 DMAs. Monday's trading has not changed the technical position of the market. If the international markets are giving out positive cues on Tuesday, the futures may again try to test the 5460 - 5465 resistance. However, it seems that the chances of a continuation of the downtrend is increasing day by day by the action of the market getting bought at every fall. ( Normally, if a strong market goes for a free fall, it rebounds even stronger trapping the bears and this condition seems to be absent now as we had three down days and two up days in the past five days. ) Another rally from the support of 50 DMA level can not be ruled out yet.

The lower panel of the above chart shows the various daily moving averages ( DMAs ) of the Nifty futures. The 20, 50,100 and 200 DMAs of the futures are placed at 5461, 5397, 5266 and 5176 respectively as on 30th August 2010. The futures may get supports at these various DMAs and other previous lows in case of a mild correction.

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on 30th August, 2010 is given below :

Because of the significant premium seen in the quotes of the Nifty future, the future has closed with a Momentum Signal value of -50, whereas the index closed with a value of -100 on Monday.