Update for 14th January 2011

     Will the Down Trend Continue ?

In the previous post we advised that traders may again look for short trades after the completion of  the bounce. This is a quote from the update for 12th January, which was also reproduced in the last post ." In case Nifty futures breaks above the immediate resistance area of 5850 to 5865, we may expect a rally even to the 5940 to 5950 area. However, such a rally will not be sufficient, to prove conclusively that the the down swing has ended, given the lack of interest shown by the FIIs on loading up the expensive Indian equities in the new year. Hence, traders may again look for short trades after the expected bounce."  

The last post also added the following : " .... option OI data seems to suggest that another down move is still possible towards the 5600 strike, on the completion of the present short covering rally."  

Therefore, anyone following the regular updates of the Momentum Signal trading system  could  have again  made a profit of around 100 points in the Nifty futures, by entering in to a short trade at or near the indicated resistance at 5865. 

Now, let's check the market action of Thursday. On Thursday morning, Infosys declared it's less than expected ( even though it seemed that the fault was with the analysts ! ) quarterly results . Infosys and the IT pack were the strongest group of equities in the indices and the last hope of the bulls. Once the market heavy weight Infosys lost more than 3 % at the opening, the bounce back failed at the first resistance of 5865 itself. Therefore, Nifty futures sold off  to the 5750 area and closed at 5761.

Nifty Futures - Intra-day Chart 

Update for 13th January 2011

     Another Rally As Expected !

In the last post we had indicated that traders may look for counter trend long trades  in the Nifty futures, especially, on declines towards the 5750 area, because of the highly oversold nature of the markets.and a price rejection at the lower levels. This suggested trade alone would have made an intra-day profit of  more than 100 points in the Nifty Futures. On Wednesday morning, Nifty futures opened flat and as expected, traded lower towards the adjusted closing price of the previous day. This probe went as low as 5711 on the back of the lukewarm economic data.   In spite of the relatively bad IIP numbers, markets staged a fine rally from the three month lows, as expected. 

But before examining the charts, here is an update of the short trade initiated in accordance with the Momentum Signal Trading system. Even if all the rules of the system were followed exactly and the trailing stop was setup at 5840, the last trade would have made a profit of 55 points in the Nifty futures. The trade generated a maximum favorable excursion ( the distance to the maximum profitable area  or low after the short trade ) of 196 points in the Nifty futures. Since the support around the 5725 to 5750 area was  known, a trader could have exited with a profit of at least 150 points in the Nifty futures.  The day's market action is seen in the intra-day of the Nifty futures below.

Nifty Futures - Intra-day Chart