Update on The Ultimate Momentum Signal - 15th Nov. 2010

Is This an Intermediate Term Correction ?

The out of the blue sell off encountered by the Indian stock market in the last two trading days of the past week has already taken out all the gains which came in the Diwali week. It seems that a lower than expected IIP number and some poor quarterly results have added fuel to the fire. Now the important question before the traders and the investors is that whether this sudden sell off is a precursor to an intermediate term correction. 

Last Friday, Nifty futures opened slightly below the previous trading day's range and  a morning's intraday  low of 6185 was established. This low was just above the 6175 support as shown in the daily charts of the Nifty futures. The recovery from this low went above the initial highs of the day and reached 6241 before noon. However, the recovery to the previous day's last traded price seems to have been used by the market participants as a selling opportunity. The market slowly went in to a slide from this high on the back of  the losses in the international markets. The lesser than expected  IIP data seemed to be adding to the woes of the market. As the trading progressed, the selling accelerated with high volumes and Nifty future recorded it's low of 6074 in  the last minutes of Friday. The last trade was at 6084.

  Nifty Futures - Daily Chart     

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.