Update on The Ultimate Momentum Signal - 22nd Sept. 2010

   Signs of profit Booking ... ?

Nifty futures opened with positive momentum on Tuesday and the day's high of 6046 was recorded in the early part of session. The widely followed indices Nifty and BSE Sensex hitting important round figure milestones of 6000 and 20000 seems to have attracted a bout of profit booking on Tuesday. The market recorded the day's low of 5972 in the first one and a half hours. The markets hovered just above the positive territory in a two trade mode for the whole trading day thereafter. Nifty futures and both the major indices closed above the important psychological levels of the earlier mentioned round figure marks. However, the advance decline ratio as seen on TV showed a negative picture of  declines of 5 shares against every advancing share.  Tuesday's trading also witnessed a marked decline in the open interest of the Nifty September contracts to the extent 23.50 lakhs ( 2.35 million ).  These two facts points to a bout of profit booking which may continue before the next leg of the rally.   

Nifty Futures - Daily Chart

The above chart shows the regression channel in which the strong rally has taken place. ( Well, the rally happened initially and the channel came later ! ).  Any minor sideways move or pause in the market may be supported by the narrow regression channel. Later on, a break of the narrow regression channel may indicate the deceleration of the rally too.

Readers of this blog might remember that this blog had been discussing the possibility of an irrational ( ? ) mad rush to get in to stocks in case of the market making a breakout above the eleven month old upward moving trading channel. ( Please read the posts dated 23rd August and 9the September, 2010 ).  Now let's revisit the Nifty index chart showing the old trading channel. 

Nifty Index Daily Chart 

The chart above clearly explains why the breakout was considered significant and why the markets behaved in the form of a run away rally after the breakout. Now, the the original channel had a height of approximately 650 points. Therefore, the breakout can also travel an equivalent height of 650 points from the breakout point of 5600. This effectively gives a target of 5250 which is just 75 points below the all time highs. A word of caution too. This target is discussed just for the purpose of learning technical analysis  concepts and not as trade recommendation. Market may or may not reach the target. Even if it reaches the target, it may happen even after a correction in which all fresh bulls may be shaken out.

World Markets   

 

The widely followed US S&P 500 index seems to have broken out above the crucial level of 1130 after a long stint below this level. The NBER, ( US National Beuro of Economic Research ) has also confirmed the end of the recession in the US. This fact together with the still continuing extreme cheap money poicies may help the continuation of the equity rally world over.

US S&P 500 Index - Daily Chart

Meanwhile the historical price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index reached 25.37, 3.87 and 1.02 as on 21st Septeber 2010. The following is a snapshot of the Nifty historical fundamental as seen from the NSE, India website.

Nifty Index - PE, PB and DY Ratios

 Source : NSE, India 

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  21st  September, 2010 is given below : 

Nifty futures and the tracked indices have closed with the maximum upward Momentum Signal values of +100 for the eleventh  consecutive trading day.
 

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   22nd 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.

The trading stop for long positions under the Ultimate Momentum Signal system  stands raised to    5919 ( i.e. 6046 minus 2.1 % of 6046 ). Traders may raise the trading stop to 97.9 % of the new high, as and when the market makes such new highs.

 

Cheers and Prosperous Investing and Trading !!!

To access and/or download  the free online Position Limit Calculator click here.

To checkout the five year history of The Momentum Signal Spreadsheet click here

© 2010, momentumsignal.blogspot.com All rights reserved.

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.

Update on The Ultimate Momentum Signal - 21st Sept. 2010

  Another Super Duper Monday ... !!!

The Nifty futures closed at the day's highs on last Friday indicating the buying pressure. And some follow up buying was also expected on Monday. As expected, the Futures opened higher and almost immediately set out for a test of the 5960 target already pointed out on this blog in the posts dated 16th and 20th September. Normally, some profit booking can be expected at such widely known targets. The Nifty futures corrected only 20 points from the said target of 5960 and again tried to test the highs. In this process of  the second test of the 5960 area, the correction from the target was limited only to just the half the points of the first.  As already explained on this blog that the third test of any support or resistance has more of a chance to effect a breakout, the third test of the target of the 5960 area resulted in an intraday breakout. And once again the bears were trapped.  It is better to remain  long instead of trying to find targets as strong bull markets have no resistances. The next minor resistances are at 6050 and 6200 before the resistance offered by the all time high at 6330.    

 Nifty Futures - Daily Chart     

 

The ferocious nature of the almost vertical rally indicates that the Nifty future is poised to test the all time highs once again. However, as the markets may not directly reach the said target and some shake out of the new bulls may happen, traders may not act on this opinion under any circumstances by making fresh long positions in the market just on the basis of this opinion. Let's see what the market does on a day to day basis and come to the conclusions on the basis of the latest happenings. 

Meanwhile the historical price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index reached 25.25, 3.93 and 1.01 as on 20th Septeber 2010. The following is a snapshot of the Nifty historical fundamental as seen from the NSE, India website.

Nifty Index - PE, PB and DY Ratios

 

 Source : NSE, India 

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  20th  September, 2010 is given below :

Nifty futures and the tracked indices have closed with the maximum upward Momentum Signal values of +100 for the tenth  consecutive trading day.

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   21st 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.

The above table also indicates the extra ordinary strength of the bull rally because, even after a passage of ten days after the buy signal, the exit signal are still placed far lower than the current market levels. 

However, The trading stop for long positions under the Ultimate Momentum Signal system  stands raised to    5879 ( i.e. 6006 minus 2.1 % of 6006 ). Traders may raise the trading stop to 97.9 % of the new high, as and when the market makes such new highs.

 

Cheers and Prosperous Investing and Trading !!!

To access and/or download  the free online Position Limit Calculator click here.

To checkout the five year history of The Momentum Signal Spreadsheet click here

© 2010, momentumsignal.blogspot.com All rights reserved.

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.