Update for 1st August 2011

Back in the Old Trading Range ?  

As indicated in the previous post that a short reversal might be in the making, Nifty future is testing the 5550 level today morning. Failure to clear the 5550 - 5560 level may still lead to a test of the lows. However, closes between the 50 DMA ( 5525 ) and the 100 DMA ( 5590 ) will indicate continuation of the trading range. As the Nifty futures are placed between important trend lines and various Moving Averages, some kind of two way trading will continue in the absence of  any triggers. Therefore, all trend following systems, including the Momentum Signal will continue to whipsaw.

Nifty Futures - Moving Averages Chart

Nifty Futures Daily Chart 

Update for 29th July 2011

 The Test of 50 DMA ( 5525 ) is On !  

Yesterday's derivative expiry did not lead to any free fall and the expiry was managed in the vicinity of the 5500 strike. It seems that the lower open helped the market to retain the ability to test the gap at the open. However, today's market action of another lower open below the yesterday's range and a test of yesterday's high and 50 DMA  may be indicating a sort of short term reversal. If today's  rally leads to a close above the 50 DMA  or a better close above the 5550 level, then it may be construed that the market is still bound by the earlier tight trading range between the 50 DMA and the 200 DMA. Until the market breaks out clearly out of this trading range, most technical indicators designed to trade trends may continue to whipsaw. However, a failure to clear the 5550 level may lead to a test of lows and even the continuation of the correction.

   Nifty Futures - Daily Chart