Nifty Heavies Revisited !

The Nifty Heavy Weights with the Best Momentum !!!

After an amazing rally to the stratospheric levels in the Diwali week, it seems that an out of the blue correction has set in, in the stock markets. It seems that equity markets all over the world are going in to the correction mode together. In case you were waiting for a correction to enter in to the stock market, the question is whether you have a stock shopping list ready ! Notwithstanding the fact that stocks  are still over priced, this analysis of the ten most important Nifty heavy weight stocks takes a look at these stocks on the basis of the recent momentum. The assumption behind this limited analysis is that the immediate momentum is liable to be persistent and on any recovery of the market, these momentum stocks will lead the rally.

Nifty and It's Heavy Weights

The top ten members of the S&P Nifty index, their weights in the index, closing prices and various daily moving averages are given in the table below. The corresponding close and the moving averages of the S&P Nifty index are also given in the table.

The last column of the above table shows the percentage value at which the last close of each stock and the index is being quoted in comparison with their respective 200 day simple moving averages ( 200 DMA ), as a simple measure of  the recent  momentum. Three other moving averages ( 20, 50 & 100 DMAs ) are also made available in the table for a better understanding of the recent momentum. Three stocks, viz. ICICI Bank, SBI and TCS were still quoting more than 20 % above their 200 DMAs as on 12th Nov. 2010 and thereby indicating the highest momentum in the sample. No wonder banking stocks were the leaders of the current upsurge even though ICICI Bank was a late entrant. The next three stocks with the highest momentum are LT, HDFC and ITC. HDFC Bank, ONGC and Infosys follow the suit and the last place is secured by the laggard,  Reliance stock.   

Now let us also checkout the charts of Nifty Index and these heavy weights for an even better understanding of the recent price action. ( Hey, it is said that a picture is  better than a  thousand words ! ).  All the charts include a regression channel showing the latest or previous general direction of the price action.  The lower panel of all these charts are showing the various DMAs. 

Update on The Ultimate Momentum Signal - 12th Nov. 2010

A Day of Losses and What to Expect Now ???

Even though it was mentioned in the last post that the chance of a breakout above or below the inside day candle remains more or less equal, it was specifically said that (a) the subtle gap might act as a precursor to some weakness ahead, (b) inside day candles can be traded by entering trades at the break of both the high and the low of the candles, (c) traders may exercise caution about a break below the low of the inside day candle, as it may trap those who were expecting a breakout above 5350 level and (d) long positions need be protected  by an intraday system stop at 6216. ( High 6349 minus 2.1 % of 6349 = 6216 ).

Now, let's check out what happened in Thursday's  trade. Nifty futures opened flat on Thursday and the initial range  was of  just 20 points. The high of the day was at 6321 and the initial low was at 6300. Trading remained directionless till around 12.00 noon. However, unable to make any progress upwards, the futures broke through the low of the inside day candle to record lows between 6275 and 6280. All recoveries from these lows were unable to progress beyond 6298 level, just three points inside the previous day's candle. The failure to progress upwards attracted further selling and later on selling accelerated. Nifty futures even broke through the intraday  protective stop placed at 6216. (  High 6349 minus 2.1 % of 6349 = 6216 ).  The day's low was at 6209. Nifty futures recovered later on to close at 6237.