Update for 22nd February 2011

 Yet Another Rally and What Now ?

• This update includes only the bare essentials due to some constraints. Readers are requested to kindly bear with the short update.
• Yet, this author is inclined to repeat some quotes from the previous post. " ....the market is still in the bullish area of the charts and some of the upward momentum might still be out there. Therefore, it seems that if the market is able to hold the 5400 level, it may recover and try to test the resistances above before deciding about the future direction by the time of budget."
• And this is exactly what happened on Monday's trading.
• Since this author was away from the trading action today, due to some personal exigencies, he is refraining from making any further market commentary in this update. However, all usual charts and data are still here. 
• However, here is an unavoidable comment. Although the union budget might become a non-event from the market's point  of view, it might still attract some avoidable event risk. Therefore, traders are advised to keep only very light positions,  preferably of the long option type. The increase in the India VIX also points in to the direction of the market's self adjustment to face the perceived event risk associated with the budget. The increase in implied volatility ( IV ) as indicated by the India VIX may affect the profitability of any such long option positions negatively, if no significant movements happens in the market after the budget.

   Nifty Futures - Intra-day Chart   

Update for 21st February 2011

 Nifty Futures Again at the Crossroads !

• Let's start this update with some performance data. The buy signal indicated by the Momentum Signal at the Nifty level of 5455 on 14th Feb. resulted in to a maximum favourable excursion ( MFE ) of 134 points. Or in other words, the trade would have lead to to a profit of 100 to 150 points, depending up on the entry and exit opportunities.
• Now here are two quotes from the previous two updates which dealt with the resistance above and the market situation.
• "If  Nifty future breaks above the high ( 5505 ) and reaches the next higher resistance area ( 5550 to 5600 ), it may attract profit booking and even some shorts." ( Update dated 17th Feb. )
• "The market is due for a small correction, as it does not usually make gains continuously for more than six or seven days. ...The kind of one way movements being seen at present  can also turn a small reversal in to a  severe one." ( Edited quote from the Update dated 18th Feb. )
• It seems that no more explanation is required to understand the market action of Friday, as the reasons behind the sell off is all in the above two quotes.
• On Friday, markets opened higher and immediately went up, forcing even the last of the bears to cover up, and upon reaching the top end of the already indicated resistance, the sell off started. 

  Nifty Futures - Intra-day Chart  

     Nifty Futures  - Daily Chart